Why Did Crude Oil Prices Rise after a Multi-Month Low?

Crude oil prices rally

This series analyzes crude oil 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 September delivery rose by 1.68% and settled at $48.79 per barrel on July 29, 2015. The falling US crude oil inventory supported crude oil prices in Wednesday’s trade. ETFs like the United States Oil Fund LP (USO) and the ProShares Ultra DJ-UBS Crude Oil (UCO) mirrored the performance of WTI crude oil prices. These ETFs also rose by 2.46% and 4.90%, respectively, on July 29, 2015.

Why Did Crude Oil Prices Rise after a Multi-Month Low?

The EIA (U.S. Energy Information Administration) released the weekly crude oil inventory data on July 29, 2015. The government data showed that US crude oil inventories fell by 4.2 MMbbls (million barrels) for the week ending July 24, 2015. On July 28, 2015, the API (American Petroleum Institute) data showed that the crude oil stockpile fell by 1.9 MMbbls for the same period. The better-than-expected fall in inventory supported crude oil prices. Even the short covering of WTI futures supported crude oil prices.

US crude oil futures lost more the $10 per barrel in July 2015. Prices fell due to slowing demand—despite the summer season’s drive and persisting crude oil glut. The Chinese stock market crash fueled the pessimism of a slowdown and fall in Chinese crude oil demand in 2015.

This catastrophic fall in crude oil prices negatively affects integrated oil players like Chevron (CVX), Occidental Petroleum (OXY), and ExxonMobil (XOM). They account for 32.19% of the Energy Select Sector SPDR ETF (XLE).

The appreciating US dollar, Iranian nuclear accord, and massive production from the US, the Middle East, Russia, and Brazil continue to ignite the pessimistic sentiments in the crude oil market.

This is the fourth up day for WTI prices in the last ten trading sessions. Prices fell by 2.03% more on the average down days than on the average up days, in the last ten days. Crude oil prices were among the top performers in yesterday’s trade. Oil prices fell more than 8% YTD (year-to-date)—led by long-term oversupply concerns.