uploads///USO ETF May

US Dollar and Oversupply Weigh Heavily on WTI Crude Oil Prices

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Nov. 20 2020, Updated 4:03 p.m. ET

Crude oil prices slump

This series analyzes crude oil prices and fundamentals. For an in-depth fundamental look at crude oil and related companies, sectors, and drivers, please refer to our Energy and Power page.

July WTI (West Texas Intermediate) crude oil futures contracts trading in NYMEX slumped by 2.83% and settled at $58.03 per barrel on Tuesday, May 26, 2015. Crude oil prices plunged due to the appreciating US dollar and oversupply concerns. The US benchmark following ETFs like the United States Oil Fund LP (USO) and the ProShares Ultra DJ-UBS Crude Oil (UCO) reflected the WTI crude oil price movement. They declined by 2.77% and 5.49%, respectively, on Tuesday’s trade.

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Iraq, OPEC’s (Organization of the Petroleum Exporting Countries) second largest crude oil producer, is planning to increase its crude oil export. The country plans to increase crude oil export by 26% to 3.75 MMbpd (million barrels per day) in the June 2015. This means an increase of 800,000 barrels of crude oil per day. The data were compiled from the shipping programs by Bloomberg. Oversupply concerns will put pressure on crude oil prices.

The US Dollar Index appreciated against the basket of major currencies on yesterday’s trade. The US Dollar Index consists of six major world currencies. These currencies are the euro, yen, pound, Canadian dollar, Swedish krona, and Swiss franc. The US dollar appreciated due to the Greece default crisis on Tuesday’s trade. The strong dollar makes dollar denominated crude oil expensive. This curbs the demand for oil. As a result, oil prices start to drop.

Last week, the EIA (U.S. Energy Information Administration) reported that the weekly oil stockpile rose by 2.67 MMbbls (million barrels) for the week ending May 15. The EIA will release the US commercial crude oil stockpile report on Thursday, May 28, 2015.

Oil prices fell for the sixth time in the last ten trading sessions. Over the same period, prices fell by 0.05% more on the average down days than on the average up days. Crude oil was the worst performer in yesterday’s trade. Prices rose by 8.51% YTD (year-to-date)—led by improving demand from Asia.

Crude oil volatility affects upstream players like Pioneer Natural Resources (PXD), Murphy Oil (MUR), and Hess (HES). Combined, these companies account for 2.38% of the Energy Select Sector SPDR ETF (XLE). They have a crude oil production mix that’s greater than 46% of their total production.

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