uploads/2015/06/uso-etf-june-9-20151.png

Crude Oil Prices Decline due to Slowing Chinese Imports

By

Updated

Crude oil prices drop

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

NYMEX-traded WTI (West Texas Intermediate) crude oil futures for July delivery fell by 1.67% and settled at $58.14 per barrel on Monday, June 8, 2015. Prices declined due to slowing imports from China—the Asian major. Oil tracking ETFs like the United States Oil Fund LP (USO) and the ProShares Ultra DJ-UBS Crude Oil (UCO) also fell in Monday’s trade. They declined by 0.95% and 2.15%, respectively, in yesterday’s trade.

Article continues below advertisement

Chinese crude oil imports declined by 6% in May 2015—compared to April 2015. The slowing imports were due to refinery maintenance in China. The refineries were offline last month. Refineries also used oil inventories. This curbed the demand for crude oil during the same period. Slowing demand puts pressure on crude oil prices.

On June 5, 2015, OPEC (Organization of the Petroleum Exporting Countries) decided to maintain its collective output target of 30 MMbpd (million barrels per day) for the next six months. The oversupply estimates will continue to put pressure on crude oil prices.

On June 3, 2015, the EIA (U.S. Energy Information Administration) reported that weekly US commercial crude oil inventories declined by 1.9 MMbbls (million barrels) for the week ending May 29. Crude oil stockpiles fell for the fifth week in a row. The next EIA report is scheduled for June 10, 2015. The market consensus is for a decline of about 1.7 MMbbls for the week ending June 5, 2015.

WTI oil prices fell for the fifth day in the last ten days. Prices fell by 0.48% more on the average down days than on the average up days, during the same period. Crude oil was the worst performer across all of the other commodities in Monday’s trade. Prices increased by 9.35% YTD (year-to-date)—led by declining US inventories and demand from Asia.

Volatility in the crude oil market impacts upstream oil companies like ExxonMobil (XOM), Occidental Petroleum (OXY), and Hess (HES). These stocks account for 17% of the Energy Select Sector SPDR ETF (XLE). They also have a oil production mix that’s greater than 53% of their total production.

Advertisement

More From Market Realist