OPEC Signals U.S. Rally

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Includes: IVV, USO
by: Jason Schwarz

The headlines stating that OPEC President Chakib Khelil believes oil could hit $200 a barrel are completely misleading. What he’s really doing is posturing the US Federal Reserve to stop cutting rates because the low dollar is killing the rest of the world. The real theme from his comments are that oil supply levels are great, in fact, he said that US gasoline inventories are at 5 year highs with easing demand.

"The prices are high due to the fact of the recession in the United States and the economic crisis which has touched several countries, a situation which has an effect on the devaluation of the dollar, and therefore each time the dollar falls one percent, the price of the barrel rises by $4, and of course vice versa," Khelil was quoted as saying in brief remarks to journalists on Sunday. "If this [the dollar] strengthens by 10 percent, it is probable that [oil] prices will fall by 40 percent."

Linking the price of crude to the rise and fall of the dollar is a brilliant move. OPEC has lost control of oil price; it’s 100% in the hands of the speculators in the futures market. He is doing everything he can to lower oil prices and regain pricing control of his commodity. Sharp rises in crude are not conducive to OPEC’s long term strategy. I’m sure the Fed is listening. I’m sure the Treasury is listening. I’m sure all of Europe is listening. As well as the Chinese. Everyone will be trying to get their hands on the almighty dollar in order to lower oil prices.

I’d like to thank Mr. Khelil for giving us the green light. As a result, we’re going to see domestic stock price multiples far outshine those that we’ve had over the last few years without the foreign capital in our market. America’s on sale and the world is buying. Time to buy the S&P 500 (NYSEARCA:IVV).

Disclosure: none