Is OPEC Controlling the Crude Oil Bull Market?
Brent and US crude oil futures
November US crude oil (UWT) (OIL) futures contracts rose 0.75% and closed at $51.3 per barrel on October 11, 2017. Brent oil futures contracts rose 0.6% and closed at $56.94 per barrel on October 11, 2017. Prices rose for the third consecutive day. They rose due to rising tensions between Iraq and Kurdistan over the Kurdish independence referendum. Tightening global supplies due to OPEC’s production cut deal also supported oil (BNO) (USO) prices. Around 85% of the crude oil production in the Gulf of Mexico is offline due to Hurricane Nate, which also supported oil prices.
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OPEC’s monthly oil market report
OPEC published its Monthly Oil Market Report on October 11, 2017. It highlighted that global oil demand is expected to rise by 1.5 MMbpd (million barrels per day) and 1.4 MMbpd, respectively, in 2017 and 2018. The forecast is 30,000 bpd (barrels per day) higher than the previous month’s report for 2017 and 2018. Improving demand is bullish for crude oil (USL) (UCO) prices. It benefits oil producers (XLE) (VDE) (XOP) like Saudi Aramco, Rosneft, Shell (RDS.A), and Chevron (CVX).
OPEC and Russia
Russia and OPEC agreed to cut production by 1.8 MMbpd between January 2017 and March 2018. OPEC and Russia are showing interest in extending the production cut deal. The deal supported oil prices in late 2016. OPEC’s monthly report stated that the production cut deal has been narrowing the gap between supply and demand. The deal has been driving Brent and US crude oil (DWT) (DBO) prices. WTI and Brent prices have risen 18% and 24% since the lows in June 2017 partially due to the deal.
Wall Street hit a new record
The S&P 500 (SPY), NASDAQ (QQQ), and Dow Jones Industrial Average Index (DIA) closed at record levels of 2,555.2, 6,603.5, and 22,872.8, respectively, on October 11, 2017. The real estate (VNQ) (IYR), IT (XLK) (VGT), and utilities (XLU) (VPU) sectors supported the S&P 500 on October 11, 2017.
API’s crude oil inventories
On October 11, 2017, the API (American Petroleum Institute) released its crude oil inventory report.
In this series, we’ll discuss the API’s crude oil, gasoline, and distillate inventory data. We’ll also discuss US gasoline demand and geopolitical tensions in Iraq.