Dollar drive and OPEC jive

November 14, 2016 08:15 AM

Crude oil prices are struggling as the dollar continues to soar and OPEC uncertainty clouds the production outlook. Strong construction data out of China helped add some suppor,t but with the dollar on fire it will be up to OPEC to turn the tide of this market. 

The Saudi Energy Minister said as much when Khalid al-Falih said it was imperative for OPEC members to reach a consensus on activating a deal made in September in Algiers to cut oil production. He is warning that members, “agree on an effective mechanism and accurate figures to activate the historic agreement of Algiers." Yet, the markets doubt that OPEC can pull it off after delaying a meeting with non-OPEC members late last week.

This came as U.S. output increased last week and Baker Hughes reported an increase of 2 oil rigs, and a drop of 2 natural gas rigs. Miscellaneous rigs also dipped by one this week. With the strength in the dollar, if OPEC does not act, then we could see a test of $40 a barrel soon. If we get an OPEC deal we will head  back to $50 a barrel.

Bloomberg News reported that Energy Transfer Equity LP surged as much as 6.5% after Politico reported Friday that the Obama administration is expected to approve an easement for the Dakota Access pipeline. The easement would allow Energy Transfer Partners LP, the entity behind the crude oil pipeline project, to begin drilling beneath Lake Oahu in North Dakota. Politico cited two anonymous sources familiar with the timing. It appears that now that we are past the election it was easier for the Obama Administration to approve the pipeline.

Natural gas may try to bottom as demand in the south is picking up. Andrew Weissman says that national electricity demand will increase this week due to intensifying warmth in the Northwest and Western regions of the U.S. Fading demand in the Southeast and South Central regions is likely to offset the rise in demand in the West. We have natural gas storage at record highs above 4 bcf, but we also will see demand at a record as well assuming we have winter.

About the Author

Phil Flynn is a senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. Phil is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets.