Crude oil, natural gas and the stock market all had a down week last week after more than a year of steady increases.
Crude oil prices on the New York Mercantile Exchange (NYMEX) declined 4.5 percent for the week ending Feb. 8 from $64.73 to $61.79.
Natural gas dropped about 10 percent from $3.01 to $2.702 during the week.
The Dow, NASDAQ and the S&P 500 all declined about 4 percent in one-day trading on Monday. The Dow declined 1,175 points from 26,616. It bounced back later in the week to the 25,500 range, which is still a 25 percent increase over its 52-week low of 20,015.
Crude oil fell four consecutive days as the U.S. dollar rose to its highest in more than a week. Crude oil is sold in dollars. As the dollar increases, it is more expensive for traders to buy crude oil because of the increased value of the dollar.
Analysts also pointed to rising U.S. oil production, and increasing stockpiles of oil and refined products (gasoline and distillates). The Energy Information Administration reported oil inventories rose 1.9 million barrels this week, gasoline stocks were up 3.4 million barrels, and distillates were up 3.9 million barrels.
EIA also noted that domestic oil production increased 332,000 barrels last week, setting another record at 10.251 million barrels per day.
The Wall Street Journal reported it polled 15 investment banks near the end of January and the banks expect West Texas Intermediate (WTI) to average $57 a barrel in 2018, up $3 from the previous survey.
“Investor sentiment toward oil has become more positive on a range of factors, including strong global growth, supply limits by big producers, a weaker dollar and output disruptions in Venezuela,” the story stated.
The story noted that rising prices could encourage U.S. producers to continue to increase production, which is seen as a factor for prices to drop.
OPEC members have reduced their production by 1.8 million barrels per day, and Venezuela (a member of OPEC) has lost 29 percent of its production because of economic problems.
Alex Mills is the former President of the Texas Alliance of Energy Producers. The opinions expressed are solely of the author.