Oil & Gas Prices: Macro View

[dan_s]

Comments below are from Roth Capital analyst John White.

Crude Oil/Macro: On Friday, 11/25/2016, U.S. crude oil fell nearly 4%, dragged down by new uncertainty over whether OPEC will reach an output deal, prompted after Saudi Arabia said it will not attend talks on Monday with non-OPEC producers to discuss supply cuts. Top OPEC oil exporter Saudi Arabia has told the producer group it will not attend talks on Monday with non- OPEC producers to discuss limiting supply, OPEC sources said, as it wants to focus on having consensus within OPEC first, as reported by Reuters.

Perhaps crude oil will fare better this week as the weekend energy news was dominated by reports of activity on and comments regarding the official OPEC meeting taking place this Wednesday, 11/30/2016, in Vienna. We note the Algerian Energy Minister, Nouredine Bouterfa, was particularly active.

On Saturday, 11/26/2016, Reuters reported Bouterfa visited Tehran and met with Iranian Oil Minister Bijan Zanganeh. "The proposal of Algerian Energy Minister on the production of each country was presented today and carefully studied," Zanganeh was quoted as saying on Saturday after the meeting with Bouterfa.

Bouterfa said Algeria's proposals called for 1.1 million b/d in cuts by OPEC members and decreases totaling 600,000 b/d by non-members, Zanganeh reported. The Iranian Oil Minister then posted on the ministry's official website, SHANA, that “Iran is optimistic OPEC can reach a deal on limiting oil supplies and plans to announce its own decision about any output curbs at the group's meeting next week.”

Then on Sunday, 11/27/2016, Reuters informed that Bouterfa will host a meeting in Algiers with Venezuela's oil minister on Monday, 11/28/2016 and then the two ministers will travel to Moscow to meet with Russian oil officials.

Natural Gas: The U.S. Energy Information Administration (EIA) reported a draw of 2 Bcf, compared to the forecast build of 6 Bcf, and last year's build of 9 Bcf. U.S. working gas in storage is now at 4,045 Bcf, which is 6.3% above the five-year average of 3,804 Bcf, and 1.0% above last year's level of 4,006 Bcf. Weather forecasts for the U.S. over the next six to 10 days call for above average temperatures along the East Coast, and below-average temperatures in the West.
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Starting December 7, the weather in North American turns very bullish for natural gas prices. Go to http://www.weatherbell.com/premium/ and watch the short video "What the Oceans tell us about the winter"

[jb2257]

Any ideas on why the sector is being sold today with the oil price going the opposite way? Maybe no one is expecting anything out of this week's meeting.

[dan_s]

Most energy stocks were down today probably because investors hate uncertainty. There is definitely a boatload of that.

Keep in mind that natural gas and NGL prices have little to do with OPEC. Actually, low oil prices are bullish for natural gas and NGLs because if the oil price stays down so will drilling in the U.S. oil shale plays. Associated gas and NGL production will continue to fall if that happens.