As some of the political machines of the mid 1800s coined the jocular phrase of “vote early and vote often”, I can’t help but think about all the spirited voters racing to their local polling establishments today and how the energy and equity markets have reacted to midterm elections of the recent past. Over the past 21 midterm elections, the party of the incumbent president has lost an average of 30 seats in the House and an average of four seats in the Senate, with only twice having gained in both houses. Below is a chart depicting the post-midterm election WTI crude oil price action of the past 4 midterm elections to the end of those respective calendar years:
Hydraulic Fracturing is the process of stimulating rock to capture gas from shale formations in the Earth, and is also one of the main reasons the United States is on its way to be a world leader in energy production. In this technological age, advancements are happening daily and rapidly. One nuance to the oil and gas industry is making the hydraulic fracturing process more seamless, efficient, safer, and less pollutant and that is coming to fruition with the innovation of Electrical Hydraulic Fracturing. So what is Electric Hydraulic Fracturing? The technology is based upon electricity powering pressure pumps and fracking equipment fueled 100% by natural gas fueled by field gas or alternative natural gas sources.
It may be difficult to believe, but WTI crude oil has been stuck in a range for the past 22 trading sessions without catapulting above $70.06 and without collapsing below $66.32. As of the close, 2:30pm EST, WTI crude oil settled down $0.16 to $67.04/bbl. Even with all the headlines of Iran sanctions, global economic outlook darkening, U.S. Dollar rallying, emerging market contagion, (Turkish Lira plunging to a record low vs U.S. Dollar), Chinese economy slowing down?, trade war fears across the globe, and the continuation of the Venezuelan humanitarian nightmare, WTI for September delivery is only down 1% from 21 days ago. In between that trading frame, we had multiple 5% selloffs, a 6% three day rally, a couple of unch’ds (unchanged on the day) and a whole lot of uncertainty.
News was released this week announcing that the U.S. would be reinstating sanctions against Iran, specifically the Iranian government’s purchase of United States Currency (Dollar), Tehran’s trade in gold, other precious metals, and its automotive industry. President Trump stated as well that if Iran didn’t comply with the reinstatement of the first wave of sanctions that his administration would look into targeting Iran’s port industry as well as its energy shipping and ship building industries. These second wave of sanctions could ultimately have an impact on global supply as well as the worlds spare capacity cushion of oil. Sanctions against Iranian Oil will impact another player in the trade war against the U.S., China. China is the biggest buyer of Iranian crude oil and with Trump and his administration exchanging tariff blows back and forth it will be a test of time to see how long China will resist communicating with President Trump and the United States.
Early in 2018, United States crude oil production was around 9.492 million barrels per day. Since that time, U.S. crude output has remained above the 10 million barrel a day mark and currently stands around 10.7 million over the last month. The rapid increase in U.S. production is due to the thriving shale industry. However, there are some concerns over the Permian Basin, the United States largest shale region, with limited pipeline transportation.