If oil were really flowing back at normal levels as Team Trump just announced, Brent would not have risen back above $91 again today. It would have fallen. Yet, this time, for some odd reason, even the oil algorithms didn’t believe the administration’s word. Maybe it was just because it wasn’t the main Trumpet blasting its horn, but one of Trump’s team liars.
Iran triggered the rise back to reality in crude prices by saying there was no chance they would ever agree to an extension on President’ Trump’s badly failed Memorandum of Understanding, which had slightly opened up the strait for a week or two and allowed a surge of oil through that helped delay hitting bank bottoms. So, the MoU expired today for good.
Iran went further than just saying no more negotiations will happen. They threatened to escalate the war, but it turned out to be much more than a threat when clandestine conversations between Iran and its proxies were discovered and reported today by the Wall Street Journal.
President Trump responded by saying Iran needs to put up a white flag of surrender, obviously totally out of touch with the fact that most of the world is saying Iran has already won a total victory over Trump because he clearly got nothing at all out of his war and his only way out right now is either to greatly intensify bombing with his diminishing weapons or to retreat by leaving everything in and around Iran in worse shape for the US and the rest of the world than it was before he began his war (in something like Joe Biden’s Afghan style.)
Trump also warned he’d bomb the United States’ ally, Oman, if it got in the way, but his most obtuse boast was that he is going to turn the Strait of Hormuz into a US territory.
“Pretty soon, I’ll be declaring the Hormuz Strait a territory of the United States… we [have the blockade…] no ships get through unless we want them to,” he said.
Yeah, well, no ships get through unless Iran wants them to, also, and that’s the bigger problem!
Brent crude isn’t about to stop at $91/bbl, however, because another bad turn happened in the oil market. China re-entered as a major buyer, possibly feeling it was time to start restocking its huge reserves that it had been relying gone. Other thoughts are that it is sucking up crude now in order to allow its refiners to cash in on huge windfalls that American refiners are in the news for doing today. China will need and can afford the foreign crude if they are going to make bank on fuel sales, which is getting easier to do by the day.
“China coming off of its crash diet is is not consistent with Brent prices being stable,” the analyst said.
In fact, China already increased its international imports by 22%, and that’s even in the face of a falling economy.
China, however, is a major opportunistic buyer of crude, taking advantage of low oil prices to stockpile reserves, which allows it to reduce crude oil imports if oil prices spike or if supply is choked, as it has been in recent months due to the Middle East crisis.
Total Chinese crude oil imports rebounded in July from the decade-low in June, with a 22% jump from June to an average of 8.45 million barrels per day (bpd) last month, customs data showed earlier this month.
Their purchases will raise the price of crude, which will keep the price of fuels rising, even as they begin selling into the international fuel market, just not rising as quickly perhaps as they would be if China did not leap into Russia’s former refining role. I did start warning a couple of weeks ago that China most likely would very soon be jumping backing the international crude oil market.
Russian oilmageddon
Russia’s situation reveals an example of the tight fuel market China can sell into if it starts buying US and European crude oil. In fact, it can help Russia by selling fuel to Russia now. One of today’s articles reports that a second wave of fuel shortages at gas stations has just swept across Russia as Ukraine has knocked more and more Russian refineries out of production. Russia is experiencing spotty fuel shortages in ten different regions spread across the nation.
This is working out in Russia just as I said it will eventually in the US based on how it did in the 70s: As some gas stations run out of fuel in Russia, others nearby are winding up with huge lines. These spotty fuel shortages are happening regions all the country. That gives the stations with fuel the ability to raise prices under diminishing competition, and the huge lines at those higher prices means many of those stations will soon run out of fuel, too. I didn’t see anything about price curbs, as Nixon tried, but Russia is banning exports of both diesel and gasoline now to keep enough for its own citizens and its own economy. Originally, it had just banned the export of diesel.
To increase fuel supplies to the domestic market, the authorities introduced a ban on exports of gasoline and diesel fuel, lowered quality requirements and began importing petroleum products.
That means Russia is creating new demand for your fuel because this situation didn’t exist before when Russia had a surplus and was exporting its fuel. Outfits that once bought Russian fuel will now have to turn to the US to a greater degree or to other nations for fuel supply. I’ve been warning this would be coming our way as both major wars are creating record energy crises.
The fuel crisis, which began gaining momentum in May and by July had spread to almost all regions of Russia….
Russia had eased its export restrictions at the end of July, which may have helped international fuel prices some. It did that because its restrictions had been effective enough to allow a short reprieve. That ended when Ukraine attacked more refineries with its suicide drones.
A crisis of government lies
Of course, your own government is responding to the spreading crisis by continuing to lie through its teeth to all Americans in order to do everything it can to jawbone fuel prices down at home or, at least, to try to prevent them from rising even higher. To wit, the Trump administration announced that oil flows through Hormuz have significantly rebounded now that the president controls the strait.
But an article on the reliable Oilprice.com asks, “Have Middle East Oil Flows Rebounded to 15 Million Bpd as U.S. Claims?”
The answer is, “NO!” Simply “no.”
U.S. Energy Secretary Chris Wright this week said that the oil exports from the Middle East have rebounded to 15 million barrels per day (bpd) and even topped the pre-war average of 20 million bpd on Sunday.
That’s a pretty big and blatant lie as Oilprice.com goes on to explain:
Vessel-tracking services and commodity analysts are baffled and struggling to reconcile these numbers with their observations of tanker loadings and traffic in the region.
Ship-tracking data shows oil flows out of the Strait of Hormuz are, at best, half the volume cited by Secretary Wright.
How big of a lie is it?
Of all oil exports out of the Middle East, various tanker-monitoring data show a gap of between 3 million bpd and 5 million bpd, as most vessel-tracking companies are estimating only about 9 million bpd leaving the region via all its export channels so far this month, per the data compiled by Reuters columnist Clyde Russell.
So, in the very least, our energy secretary overstated the truth by 100%
The U.S. energy secretary posted on X that oil flows from the Middle East have normalized, with Sunday traffic alone above pre-conflict averages, in a claim that appears not to be backed by ship-tracking data.
OR ANY DATA!
“It is not possible to reconcile the disparity between what we see and what he is quoting,” Matt Smith, director of commodity research at Kpler, told CNN, commenting on Wright’s claim….
Kpler data showed earlier this week that vessel traffic at the Strait of Hormuz continues to decline as last week’s hopes of negotiations of a U.S.-Iran deal began to fade, yet again….
The U.S. official did not reveal how “the best available data related to oil and oil products leaving the Arabian gulf” is being compiled and/or analyzed.
How convenient. Everything from the Trump administration is always the best. “No one has ever seen anything like it.” In this case, no one has seen it all all—the oil, that is, or the data.
The private businesses tracking the shipments estimate current oil flows out of the Strait of Hormuz at up to 5 million bpd at best, and at about 9 million bpd-10 million bpd for the entire Middle Eastern region.
The administration is pretending Trump controls the Strait of Hormuz, but 5-million- bpd proves that is a lie.
They can’t even get their fact straight within their own agency:
Even the U.S. Energy Information Administration (EIA) said this week in its monthly Short-Term Energy Outlook (STEO) that traffic at Hormuz remains “severely constrained” and assumes this would be the case throughout August.
You cannot get to the number of barrels per day the secretary claimed with “severely constrained” shipping traffic.
The article does provide this caveat that could make the secretary’s words not a lie if it proves out:
Of course, there is the possibility that vessel-tracking services could be underestimating the Middle East’s current export volumes, due to heightened dark-mode activity of tankers.
However, the private companies trying to analyze this are looking for signs of dark-mode activity getting through, and they are not seeing anything that significant. So, where is the oil going once it makes it through and is far enough from Iran not to have to remain dark anymore? The Trump administration has a solid reputation for lying now to where even Oilprice.com closes with,
But it is equally possible that the U.S. Administration is spinning a wishful thinking of one outcome of the war in Iran, as this week showed a new deadlock in the U.S.-Iran talks and the contrasting claims of control over Hormuz.
Or simply the U.S. Administration could be trying to talk down oil prices again, with the midterm elections in November approaching but Americans still paying high gasoline prices.
I’m past extending the administration any caveats or benefits of the doubt in the face of facts that clearly don’t appear to agree with them. I’m banking on their flawless track record for lying every single time throughout this war when Trump said. “We’re going to bomb them out of existence” and especially things like “We’re holding off on that bombing because Iran really wants to make a deal badly right now.”
I was right to continually discount that as a lie; that much is certain because Iran now claims it never did any negotiations. It just held out the same list of demands in case the president actually wanted to end the war, which it did not believe the president intended to do. That has now become a tougher list in order to make him wince a little more. In fact, a few sources in Iran said today that Iran largely used Trump’s pauses to replenish its weapons in readying itself for a larger more offensive war that it intends to initiate upon the slightest provocation.
In fact, the WSJ reported today on Iran’s secret plans for intensifying the war, which certainly prove it was never “negotiating,” just stalling by offering Trump a deal he would never take or that they would be glad to accept if he actually did take it. They never took Trump seriously:
The Wall Street Journal published a bombshell report detailing how, behind the scenes, Iranian hardliners dug in this summer to prepare to escalate the war with the U.S. amid negotiations to resolve the conflict, which they viewed as a delay tactic by the Trump administration.
The report by Benoit Faucon and Summer Said titled, “Iran’s Secret Plan to Escalate the War,” is based on intercepted communications between Iran and its proxies in the Middle East, which raised alarm within Arab intelligence agencies in the region. The Sunday evening report dropped just hours before Trump threatened more strikes on Iran as the current memorandum of understanding is set to expire.
The report details how, after Trump signed the memorandum of understanding in mid-June to take steps to resolve the conflict, “Iran’s hard-line leaders huddled in Tehran and came up with a different plan, according to Iranian and Arab officials.”
“In their view the pact was likely just an attempt by the U.S. and Israel to take pressure off the global economy and buy time for a bigger attack down the road. Instead of putting faith in talks, they took the past two months to prepare for a bigger fight,” continued the report before detailing the steps Iran took to widen the conflict….
Today, the headlines are available for all, so you can read the details of how Iran plans to expand the conflict in the headline section below by shifting from defense to offense. (I have done as I always try to do and found a version of the story for you that does not require a WSJ subscription to read it for those who are not WSJ subscribers.)
“Their overriding goal is to inflict enough pain to ensure the kind of attacks Iran has endured with the 12-day war last year and the continuing conflict aren’t repeated.”
“There is also a widespread view in Iran that the main war has not yet begun.”
Let those last words sink in.
Prediction: Fuel prices will rise more
The national average price of gasoline remained above $4 per gallon this week.
“While gasoline demand is down, crude oil prices are keeping pump prices higher than normal for this time of year,” AAA said on Thursday.
“So far, this is the highest August on record when it comes to the national gasoline average.”
To calm Americans, Trump said it might be necessary …
“for you to pay a tiny little bit more for your gasoline….”
“Remember that when you have to pay a little bit more, you’re at $4,” before declaring he would “never apologize” and adding, “I did the right thing.”
Trump still hasn’t figured out how to get any of that uranium out of their hands, and he said again today that is an absolute imperative; so, gas prices are not going to freeze “at $4.” That’s the new American Dream price. With Iran set to escalate and both sides saying “no more negotiations,” as Trump also said today, and Russia’s situation getting worse, and China back to buying crude in large amounts, price contagion will spread. I will be surprised if we don’t hit a national average of $5/gal. before this war is all done. In fact, I think I’m hedging my prediction bets by giving a top number that low. I’m playing it safe.
My only caveat would be if the American economy crashes so severely and so quickly that it even sucks the heat out of fuel prices because no one and no thing is going anywhere. In that case, it will hardly matter. The economic damage that can be expected from an energy crisis will have merely arrived before the energy crisis could even reach its peak prices as a testimony to how fragile other parts of the economy are like those private credit loans that are hitting the news with bigger defaults today and rising Treasury troubles and AI stock bubbles.
Economania (national & global economic collapse plus market news)
AI Bubble: “The Moment they Stop Spending on CAPEX, they Crash Markets”
Oil Majors Reap $93 Billion Windfall From the Iran War
Refiner stocks are on a nearly unprecedented run. History says it could end soon
Private credit under strain as troubled loans swell
Money Matters (monetary policy, metals, cryptos, currency wars & going cashless)
Hold onto your hats!: Reports coming out of CHINA about total Treasury dump (Unconfirmed and unknown source. Also read similar unconfirmed report out of Japan.)
What rising Treasury yields are telling us
30-year Treasury yield tops 5.31%, the highest in 19 years
Inflation Factors (too much money chasing too few goods due to weather, sanctions, tariffs, quarantines, etc.)
Brent oil rises to $91 as Iran rules out interim deal extension, threatens to escalate conflict
Second wave of fuel shortages at gas stations sweeps across Russia
Have Middle East Oil Flows Rebounded to 15 Million Bpd as U.S. Claims? (No.)
China Oil Imports Jump 22% Even as Economic Data Disappoints
Depleted strategic oil reserve nears level that raises concerns about damage to caverns, operations
Why Haven’t the Tanks Run Dry? What Investors Are Missing in Oil.
Iran defiant on strait as Trump tells Americans to accept high gasoline prices (Concerned about inflation, “Get over it” President seems to say.)
UK Inflation Set to Rebound as Energy Bills Surge
Wars & Rumors of War (including cyberwar, civil unrest and revolts)
Iran’s secret plan to escalate the war
Trump makes new declaration that he’s making the Strait of Hormuz a US territory
Trump threatens Oman as US-Iran agreement expires
Iran Strikes Push US Navy Logistics to Diego Garcia as USS Abraham Lincoln Strains
Trump sends aircraft carrier to relieve crisis-hit Abraham Lincoln
Trump says USS Abraham Lincoln deployment ‘not nearly long enough’ amid outcry from families
MTG: White House is discussing using nuclear weapons on Iran in strategy meetings
War and Eschatology: How Iran’s Mahdist Ideology Shapes the U.S.–Iran Conflict
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Moscow ‘under siege’ as Ukraine onslaught starts inferno at ‘Russia’s Amazon’
Ukraine launches one of its largest drone attacks on Moscow Oblast
Russian state bank fires economist who warned Moscow was losing ‘war of attrition’ with West
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Russia builds secret drone bases in striking distance of Nato
NATO fighter jet opens fire as warplanes scramble to intercept ‘Russian’ drone
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Street rallies held as Taliban govt marks five years ruling Afghanistan after US fled
Political Pandemonium & Social Senescence (socio-political issues & events)
(Meanwhile, tariff revenue came in below zero, and interest now costs more than the military; yet, Republicans want another major tax cut like Big Beautiful Billionaire.)
Massive Trump merchandise store goes out of business - because nobody is buying anything. (“He admitted that Trump’s popularity was ‘dwindling’ and noted that a lot of people are struggling with their finances in the face of Trump’s tariffs and high gas prices resulting from his war in Iran.”)
Most US voters say they are worse off under Trump
Why Americans now hate each other more than ever
The buck stops somewhere else: A look at Trump’s tendency to avoid blame when things go awry
Dems now favor socialism over capitalism by this overwhelming amount
Trump’s Rump: What is going on with that? [It depends.]
Calamity, Catastrophe & Climate Craziness
It’s Getting So Hot That Nuclear Plants Are Being Forced to Power Down
Magnitude 7.7 earthquake kills at least 47 and toppling buildings
Lala floods Hawaii, knocks out power after brushing just beyond the Big Island as hurricane
Off-the-Beat News & Just Plain Offbeat News
Recalls surge for millions of vehicles as parked cars are bursting into flames
Why Three Minutes Of Sprinting May Beat An Hour+ Spent Exercising
Hope for Hard Times
Construction Workers Dig Up Ten Million Dollars in Gold and Turn It In (Some people still do the honest thing.)
Doomer Humor
Getting harder to keep up with all the lies anymore. Linking as usual. David