And there goes the Trump trade.
It was a mixed week for the Trump trade, with U.S. equity markets gaining early and slipping a bit toward the end. The S&P 500
On Friday, the President's main contribution to market activity was a tweet in which he blamed OPEC for high oil prices, perhaps noticing that the price of gasoline has been going up as the summer driving season approaches. The U.S. Department of Energy expects gas prices to rise 33 cents a gallon by summer, up to $2.74 as the national average between April and September.
"Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea. Oil prices are artificially Very High! No good and will not be accepted!," Trump wrote on Twitter.
West Texas Intermediate crude prices had surged almost 8% in the past month from $63.40 a barrel to $68.29 a barrel by Thursday's close. Following Trump's tweet, the domestic crude benchmark fell by a fraction of a percent but ended the day up nine cents to $68.38. OPEC has stuck to production cuts agreed to in January 2017 to help lift the price from the mid-$40s at the time.
Still, as my colleague Tom Terrarosa reports after an email exchange with Morningstar Inc. commodities analyst Sandy Fielden, the current surge in crude prices has more to do with concerns that have risen since Trump became President.
Those include the threats of a trade war with China, of real war in the Middle East, and the possibility that the U.S. will back out of an accord with Iran that could lead to lower exports from that country, Fielden said.
"All these bearish factors pushing prices higher are arguably directly caused by Trump administration policies," Fielden said. "Trump blaming OPEC for higher prices is definitely a case of the pot calling the kettle black."
Terrarosa reports that Trump has an option regarding gasoline prices that he may not realize he has. Under the same 2015 legislation that allows the President to control the export of crude oil, the chief executive has the power to force domestic petroleum refiners including Valero Energy Corp. (VLO) and Phillips 66 Co. (PSX) to reduce gasoline exports on the grounds that those sales are forcing U.S. consumers to pay more at home.
"Limiting exports of gasoline would force it to be consumed state-side, the same mechanic that forced the Brent-WTI differential to be so wide before crude exports were allowed," Stratas Advisors commodities analyst Ashley Petersen told Terrarosa in an e-mail. "There are steps refiners would then take to minimize gasoline production, but we'd have effectively created artificial gasoline oversupply."
The president told Americans while on the campaign trail that he alone is the fellow to fix things. How about bringing down the price of gas?
Market observers have repeatedly noted that the President's business-friendly policies of lower corporate taxes, fewer regulations, scant enforcement and the evisceration of the labor movement can be overshadowed by some of the same Trumpian impulses that have boosted oil prices.
But there may be another consideration that's keeping investors from bidding stock prices higher in an environment that's more favorable to corporate profit-making than any time since the Roaring Twenties, and that's the calendar.
It's only a little over six months until November, when despite all their success in passing tax reform the Republicans in Congress will ask to be returned to power amid signs of eroding popular support, generated partly by the President's unpresidential behavior.
At that point the House of Representatives, and perhaps also the Senate, may change from being simply unable to do what Trump wants, to outright opposition. If that happens, consider the tax cuts endangered and the regulatory state encouraged.
Fun times for oil traders, but maybe not stock pickers.
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