Cold weather and the lack of a rate hike by China was not enough to keep the oil bulls interested all day. Despite all of the early bullish momentum and the encouragement from other soaring commodity markets like silver, sugar, gold, soybeans and orange juice, oil seemed to shy away from $90 per barrel once again. Perhaps because unlike some of the other markets I mentioned, oil still has an abundance of supply. The other markets have a tightness of supply or a threat to supply due to the weather.
People made a lot out of the fact that OPEC is going to keep production steady but what does that matter when their production is rising anyway. Perhaps the oil market forgot about OPEC’s pledge when they saw that compliance with their cuts is only at 54%. Perhaps the market is convinced that compliance will slip more as we get into their heart of the strong winter demand season. That comes as some OPEC ministers seem to suggest that $100 a barrel might be a fair price for oil. Still the Saudis are the key and it is clear that Ali Naimi of Saudi Arabia may be ok with $90 but $100 will be out of the question.
The market seemed unconcerned about the latest in the Iranian soap opera otherwise known as, “As the Ahmadinejad Turns”. It seems that the illegitimate president of Iran is further cementing his power by firing the country’s foreign minister, replacing him with his top nuclear official. The AP reports that “Iran's foreign policy will not be affected by the firing of the foreign minister, the ministry spokesman said, amid criticism by lawmakers and the media over the president's unexpected decision.” Yes their foreign policy will continue to use lies and threats.
Gas price watch! Well we did not hit $3.00 a gallon as our national average yet but with the refinery issues it is going to be close. According to the EIA we hit $2.98!
The failed follow through on $90 per barrel seems to suggest that oil prices still will be best traded in a range.
Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or at email@example.com.