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US Crude Oil Prices Are Almost Flat on Slowing Demand from China

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Crude oil prices fall for three days in a row

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.

August WTI (West Texas Intermediate) crude oil futures trading in NYMEX fell for the third day in a row. Prices fell slightly by 0.04% and closed at $50.89 per barrel on Friday, July 17, 2015. Slowing imports from China and speculation of excess supply from Iran put pressure on crude oil prices. The US benchmark following ETFs like the United States Oil Fund LP (USO) and the ProShares Ultra DJ-UBS Crude Oil (UCO) also mirrored the price trajectory of WTI crude oil prices. These ETFs fell slightly by 0.35% and 0.70%, respectively, on July 17, 2015.

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Supply and demand

On the demand side, Chinese crude oil imports fell by 11% in May 2015 compared to the levels in 2014, according to data from the General Administration of Customs in Beijing. Oil imports fell due to the maintenance of some of the Chinese refineries. China is one of the largest consumers of crude oil after the US.

On the supply side, Saudi Arabia continued its massive production in June 2015. The oil glut market was also feeling the heat due to Iran’s nuclear deal. Iran might flood the oil market with 500,000 barrels of crude oil within six months of lifting the oil sanctions. In contrast, the oil market felt some relief as US production fell for the week ending July 10, 2015. US oil inventories fell during the same period.

The US dollar continued to put downward pressure on dollar-denominated crude oil. The US dollar appreciated against the basket of currencies on Friday’s trade.

WTI prices fell for the fifth time in the last ten trading sessions. Prices rose slightly by 0.60% more on the average up days than on the average down days, over the last ten days. WTI futures contracts for August delivery had a mediocre performance with respect to other commodities in yesterday’s trade. Prices fell more than 5% YTD (year-to-date), led by oversupply concerns.

The roller coaster ride of crude prices impacts energy producers like Hess (HES), Murphy Oil (MUR), and Occidental Petroleum (OXY). These stocks account for 5.26% of the Energy Select Sector SPDR ETF (XLE). These companies also have an oil production mix that’s more than 53% of their total oil production.

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