The Phil Flynn Energy Report
OPEC Stays Strong
OPEC Plus decided to send a message of confidence to the global oil market. By choosing to go ahead with their 400,000 barrels of oil a day production increase, they seemed to be saying that they're not afraid of your omicron variant.
The move caught traders by surprise, and after the initial sell-off, traders realized that if OPEC was raising production, they must not be too concerned that oil prices could fall any further and probably cemented the bottom in a market that has been fixated with concerns about the omicron variant. It may be too early to tell, but reports seem to suggest that this variant is very mild and may not have nearly as much impact on global oil demand as the market has priced in.
A weaker-than-expected jobs creation number released this morning caused the dollar to sell off and gave oil a bit of a boost.
The Biden administration celebrated the OPEC decision but, in the meantime, still are investigating U.S. oil and gas companies for colluding in raising gasoline prices.
The Iranian nuclear talks don't seem to be going anywhere. They were delayed today until next week, and little progress is being made despite reports of a draft communique last week. Both sides show skepticism that a deal can get done. So don’t look for any Iranian barrels to come on the market anytime soon.
Natural gas prices are bouncing back. The weather forecast for late December may turn cold again. The market looked extremely oversold, and now it seems like we could find some support and start to rally again. We think that natural gas should be bought on breaks but be cautious as the weather appears a major factor in Europe. In addition, of course, tensions continue to be running high with Russia.
Christine Lagarde expects energy prices to come down dramatically in 2022. What does she know that we do not know?
Market action suggested oil has finally hit bottom though we could still see some volatility. Our expectations are it's time to put on those hedges.
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