Phil Flynn: Giving OPEC Too Much Credit

When Ali Naimi speaks the markets listen but should they? Some gave credit to yesterday’s big rally in oil to comments by the “Alan Greenspan” of oil, the de facto leader of the OPEC cartel, Ali Naimi, who said that oil was in a comfortable range between $70 and $90. Some took that to mean that Mr. Naimi was hoping for 90 barrel oil. Or could it be that oil rallied because China’s data was stronger than expected. Or could it have been the the Federal Reserve and their major money printing binge. The truth is that oil popped on the data and gained more strength on the reports of the bomb going off in Athens, Greece.

OPEC is not the driving force in the oil market. In fact the man that the oil market listens to is Ben Bernanke and not Ali. Mr. Naimi's impact, like Greenspan's, is in the past not the present. Oil of course also listens to the Forex market. Overnight the Aussies shook up the global markets by a “pre-emptive” 25 basis point rate hike 4.75% its first rate increase since May. Natural gas prices lost ground. The main reason was that oil was higher.

The natural gas versus crude spread was very evident. Of course the fact that we have a global glut of gas may have weighed on market sentiment as well. Reuter’s News reported that according to the International Energy Agency the globe has a natural gas glut that could last for a decade. Reuters says that, “An existing natural gas glut could run for as much as 10 years, Nobuo Tanaka, executive director of the International Energy Agency (IEA) said on Monday.

”If we assume the current level, the gas glut may go on for as long as 10 years, but there is uncertainty about how strong demand will be from China, so it could be much shorter," Tanaka told reporters in Singapore, where he is attending an industry meeting. Qatar, the world's largest exporter of liquefied natural gas (LNG), said earlier it expected the global gas glut to end......Read the entire article.


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