Why US Crude Oil Prices Are near a 6-Week High
Crude oil prices
WTI (West Texas Intermediate) crude oil (RYE) (XOP) (VDE) futures contracts for May delivery rose 0.6% and settled at $53.4 per barrel on April 11, 2017. The S&P 500 (SPY) (SPX-INDEX) fell 0.1% on the same day. Oil and gas are major parts of the energy sector. The energy sector contributed to ~6.6% of the S&P 500 as of April 7, 2017.
US crude oil prices are near a six-week high due to the following:
- renewed optimism of a possible extension of major producers’ production cut deal
- supply outage in Libya
- concerns of geopolitical tensions in the Middle East due to Syria
- Russia’s intent to extend major producers’ production cut deal
- expectation of a fall in US gasoline and distillate inventories
- start of the summer driving season in the US could boost demand and support oil prices
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Major oil producers’ deal
On April 11, 2017, Saudi Arabia said that it would support OPEC to extend major producers’ production cut deal beyond June 2017. It supported oil prices on April 11, 2017. Six OPEC members and Oman expressed interest in extending major producers’ production cut deal in 2H17. OPEC’s next meeting will be on May 25, 2017. The meeting will be the key driving force for oil in the next two months.
The API’s (American Petroleum Institute) bullish crude oil inventory supported US crude oil prices. Prices rose in post-settlement trade on April 11, 2017.
Market focuses on US crude oil inventories
The U.S. Energy Information Administration will release its weekly crude oil inventory report on April 12, 2017, at 10:30 AM EST. We’ll look at the API’s estimates for US crude oil and gasoline inventories in Part 3 and Part 4 of this series.
In this series, we’ll also discuss US gasoline demand. Let’s start with US crude oil prices in early morning trade on April 12, 2017.