Saudi energy minister, Khalid Al-Falih, was touring Russia over the weekend and suggested that there could be a further cut in oil production if oil inventories did not start to drop dramatically. While Al-Falih believes we will start to see inventory tightening accelerate in the coming weeks, he said that if we don’t see inventory drop, then an extension of cuts or a larger cut may be implemented and said that nothing, when it comes to getting the oil market in line, will be off the table. Those comments were echoed by Russian energy minister Alexander Novak who also suggested that current production cuts would soon get the oil market in line.

Oil is also getting support on reports that Qatar will continue to cooperate with OPEC cuts despite the political tensions. 

Oil prices are also getting support from the technical side of the market. The market seemed to suggest a double bottom of major support and the slow stochastics crossing which means the computer traders are going to be buying breaks as opposed to selling rallies. In fact, it might be dangerous being short into the next OPEC meeting now that there is a possibility of a further cut. The OPEC/non-OPEC monitoring committee are meeting July 22-24 in Russia. We think that this would be a great time to look to put on bullish strategies.

We expect to see a drop in U.S. oil supply to the tune of 3.5 million barrels. We should see another big drop in Cushing, Oklahoma supply as well of 750,000 barrels. Distillates should rise by 1.0 million barrels and gasoline should fall by 2.5 million barrels.