4: Export Curbs
Other levers the Biden administration has at its disposal include limiting the export of gasoline and diesel. The White House considered that option last year as a potential means to tame pump prices, which reached an all-time high in June, but it never pulled the trigger. Analysts said moving ahead with the curbs could backfire and actually lead to higher prices in some parts of the US.

“If we go into the summer with gasoline at $4 a gallon, I would think they would also revive consideration of product export restrictions,” said Bob McNally, president of consultant Rapidan Energy Group and a former White House official. “If this leads to an overtightening of the oil markets — as they say in the Navy, stand by for heavy rolls.”

Requiring oil companies to store more fuel in inside the US — mandatory stockpile requirements that were considered last year in response to previously low fuel inventories — is an option that could return to the table as well if gasoline prices remain high, McNally said.

Eoin Treacy's view

OPEC+ needs high energy prices to come close to balancing their budgets. The last thing they want is the profound volatility of the last few years where oil prices have swung from lows near -$40 to highs near $130. The fact the USA is energy independent and no longer a big buyer from OPEC+ means it is a competitor in supply and therefore unable to dictate terms to the group.

Greg Abbott, government of Texas, is already talking about raising production by 1 million barrels to compensate for the drop. The big takeaway is there is no shortage of oil, at least for now. What we have is a reluctance to invest in new supply because of regulatory burdens.
The oil price gapped higher following the news of the supply cut and is now testing the yearlong sequence of lower rally highs.

Diamondback Energy, with its focus on the Permian Basis, is also testing its six-month sequence of lower rally highs.  

This trajectory of oil prices is a likely to be a significant determinant in how inflationary expectations evolve. If the price follows through on the upside, as seems likely, oil rolls as a tax on consumption will inflate prices in the short-term but ultimately contribute to deflation as demand rolls over.

China’s lower than expected PMI reading suggests the rebound from pandemic privations is very focused on consumer appetite for imports than outright demand growth. 

Bond yields compressed this morning on the news. I remain of the view the most likely scenario is a deflationary shock at some point this year, which will reset inflation expectation and act as a catalyst for the next round of easy monetary and fiscal policy.
With lower yields, gold continues to firm within the shallow range beneath the psychological $2000 level.