Will Crude Oil Prices Maintain Their Bullish Momentum?
Crude oil prices
January WTI (West Texas Intermediate) crude oil (ERX) (BNO) (USL) (ERY) futures contracts rose 0.2% and settled at $52.23 per barrel on December 20, 2016. It’s the highest settlement in 17 months. January WTI crude oil futures contracts expired on December 20, 2016.
February WTI crude oil futures contracts rose 0.5% and settled at $53.3 per barrel on December 20, 2016. Brent crude oil futures rose 0.8% and closed at $55.35 per barrel.
Crude oil prices are up due to the expectation that major oil producers’ production cut will curb oversupply in the market. OPEC (Organization of the Petroleum Exporting Countries) and non-OPEC producers agreed to reduce crude oil production by 1.8 MMbpd from January 2017 onwards.
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Crude oil prices and major oil producers meeting
Brent and WTI crude oil prices rose 16% and 13% between November 25 and December 20. For more on the OPEC and non-OPEC meeting, read Crude Oil Prices Skyrocket as OPEC Agrees to Cut Production, How Will OPEC’s Production Cut Impact Crude Oil Prices, and How OPEC and Non-OPEC Producers Affect Crude Oil Prices.
However, resuming operations at the Es Sider port in Libya could limit the upside for crude oil prices. For more, read Libya’s Crude Oil Production Could Impact Crude Oil Prices. Traders will keep an eye on major oil producers to check whether they comply with the production cuts.
US crude oil inventories
Expectations of a bullish crude oil inventory report could support crude oil prices. The U.S. Energy Information Administration will release its weekly crude oil inventory report on December 21, 2016, at 10.30 AM EST. We’ll look at the API’s (American Petroleum Institute) estimates for US crude oil and gasoline inventories in Part 2 and Part 3 of this series.
Impact on stocks and ETFs
Moves in crude oil prices can impact oil and gas exploration and production companies’ earnings such as QEP Resources (QEP), Synergy Resources (SYRG), ExxonMobil (XOM), Chevron (CVX), and Marathon Oil (MRO).
The rollercoaster ride in crude oil prices impacts ETFs and ETNs such as the PowerShares DWA Energy Momentum ETF (PXI), the Fidelity MSCI Energy ETF (FENY), the Guggenheim S&P 500 Equal Weight Energy ETF (RYE), and the SPDR S&P Oil & Gas Equipment & Services ETF (XES).
What’s in this series?
In this series, we’ll discuss the API’s crude oil and gasoline inventories, gasoline demand, the global crude oil supply outage, OPEC’s monthly crude oil production, and China’s crude oil imports.
Let’s start with US crude oil prices in early morning trade on December 21, 2016.