OPEC production/dollar weaken crude as Administration shows coal love
Oil prices are falling on reports of rising OPEC oil production, but the main culprit is likely the rising dollar.
Reports that Nigerian and Libyan oil production increased caused some selling as well as a report by Baker Hughes that showed the U.S. oil rig count rise by six, even as the natural gas rig count fell by one. Still reports of problems at Libya’s largest oil field that was shut since Sunday and a pledge by the United Arab Emirates to reduce production by 139,000 barrels per day in November puts the oil price fate in the hands of the dollar (see chart below).
A proposal by the U.S. Department of Energy may be the biggest story in energy today as the Trump Administration looks to reward coal and nuclear on the basis of those forms of energy contributions to the electric grid reliability and resiliency.
Energy Secretary Rick Perry invoked his powers under the Department of Energy Organization Act, to direct the Federal Energy Regulatory Commission (FERC) to consider a new grid resiliency rule according to Reuters.
“The proposed rule would require independent system operators (ISOs) and regional transmission organizations (RTOs) regulated by FERC to implement new electricity market rules compensating eligible power producers for their contributions to reliability and resiliency. Specifically, the (proposed) rule allows for the recovery of costs of fuel-secure generation units that make our grid reliable and resilient,” Perry wrote in a letter to FERC dated Sept. 28. “Such resources provide reliable capacity, resilient generation, frequency and voltage support, (and) on-site fuel inventory,” he explained. “The rule allows the full recovery costs of certain eligible units.”
“Eligible units must ... be able to provide essential energy and ancillary reliability services and have a 90-day fuel supply on-site in the event of supply disruptions caused by emergencies, extreme weather, or natural or man-made disasters.”
The proposed rule would require ISOs and RTOs to establish “just and reasonable” tariffs for eligible units to recover their full costs and earn a fair rate of return.