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Crude Oil Prices Decline Again, Led by Cushing Stockpiles

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Crude oil prices decline again

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 contracts for August delivery dropped by 0.97% and settled at $50.91 per barrel on July 16, 2015. Prices declined for the second day in a row, led by a strong dollar and oversupply concerns. WTI-tracking ETFs like the United States Oil Fund LP (USO) and the ProShares Ultra DJ-UBS Crude Oil (UCO) also fell in the direction of US crude oil prices in yesterday’s trade. They declined by 1.04% and 1.96%, respectively, on July 16, 2015.

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On July 15, the EIA (U.S. Energy Information Administration) published its weekly crude oil stocks report. US crude oil inventories at Cushing, Oklahoma, increased for the third straight week to 57.1 MMbbls (million barrels) for the week ended July 10, 2015. Cushing, Oklahoma, is the US WTI crude oil futures delivery point and the largest storage hub of US crude oil.

Iran and the dollar

The US dollar appreciated against the basket of global currencies. Dollar-denominated crude oil felt the heat, as the strong dollar makes crude oil expensive for oil-importing nations.

Pessimist sentiments continued since Iran’s nuclear deal could flood the oil market with excess crude oil. The consensus of massive inventories and Iran’s large crude oil reserve added more pressure to crude oil prices.

This is the fifth down day for WTI prices in the last ten days. Over the same period, oil prices increased slightly by 0.29% more on the average up days than on the average down days. August WTI futures recorded an average performance among all other commodities in yesterday’s trade. Prices declined by 3.2% year-to-date, led by the appreciating dollar and oversupply factors.

The long-term downward trend for crude oil prices affects upstream players like Murphy (MUR), Occidental (OXY), and Chevron (CVX). Combined, these companies account for 17.12% of the Energy Select Sector SPDR ETF (XLE). The crude oil production mixes of these stocks are greater than 53% of the companies’ total production.

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