Oil prices surged closing at above $70 a barrel for the first time in three and a half years, only to have a nuclear meltdown in aftermarket trading. WTI further set a record 2.7 million contracts of open interest, but fell hard after President Donald Trump tweeted that he would announce his decision on the Iran nuclear deal on Tuesday at 2 p.m. ET.

That tweet caused a selling frenzy taking a dollar off the price of crude in a very short period. It could have been a simple case of “buy the rumor and sell the fact”, but it also can be because some fear that perhaps the President had a change of heart. Yet, overnight it seems clear that the U.S. more than likely will pull out of the deal and that will impact global oil supply. Many countries, who want to deal with the U.S., will shy away from buying Iranian oil. Even if Europe finds a way to stay in the deal, the most likely outcome is that Iran will have to give a big discount on their oil to move it.

We also have more fears that Venezuelan oil exports will continue to fall. ConocoPhillips say they will take Caribbean assets of state-run PDVSA to enforce a $2 billion arbitration award. The move is going to make it difficult for PDVSA’s to do business.

On top of that Bloomberg News is reporting that “Military officers are joining the exodus of Venezuelans to Colombia and Brazil, fleeing barracks and forcing President Nicolas Maduro’s government to call upon retirees and militia to fill the void. High desertion rates at bases in Caracas and the countryside are complicating security plans for the presidential election in 13 days, which by law require military custody of electoral materials and machinery at voting centers.”

Yet oil traders would do themselves a disservice if they focused on geopolitical risk alone. While some believe the risk is the only reason for prices rising it is only part of the oil bull market story. Demand is the real story and it is demand mixed with underinvestment that helped erase the biggest oil glut of all time. The U.S economy is doing great. Even the critics of the Trump tax cuts are now acknowledging the benefits to all Americans. The Washington Times reports that April was the best month in history for the U.S. budget, according to Congressional Budget Office figures. The federal government took in a record tax haul in April in route to its biggest-ever monthly budget surplus, the Congressional Budget Office said, as a surging economy left Americans with more money in their paychecks — and thus more to pay to Uncle Sam. All told the government collected $515 billion and spent $297 billion, for a total monthly surplus of $218 billion. That swamped the previous monthly record of $190 billion, set in 2001.

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