Crude oil prices fall
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 fell by 2.47% and settled at $42.23 per barrel on Thursday, August 13, 2015. Prices continued to fall due to the speculation of rising crude oil inventories and the appreciating US dollar. The US benchmark following ETFs like the United States Oil Fund LP (USO) and the ProShares Ultra DJ-UBS Crude Oil (UCO) mirrored the price trajectory of crude oil prices in yesterday’s trade. These ETFs fell by 2.42% and 4.49%, respectively, on August 12, 2015.
The preliminary estimates of the rise in the crude oil inventories at Cushing, Oklahoma, by 1.3 MMbbls (million barrels) as of August 11, 2015, fueled the oversupplied crude oil markets with negative sentiments.
In contrast, the EIA (U.S. Energy Information Administration) reported that the weekly crude oil stockpile fell by 1.7 MMbbls (million barrels) for the week ending August 7, 2015.
The US Dollar Index appreciated against the basket of currencies in yesterday’s trade. The improving US employment data and robust retail sales figures supported the US dollar. The appreciating dollar makes dollar-denominated crude oil expensive for oil importing nations. As a result, it negatively affects crude oil prices.
The EIA expects that Iran’s nuclear accord and easing of the oil sanctions by end of 2015 could step up Iran’s production by 100,000 bpd (barrels per day). The mammoth production from the US, Russia, and the Middle East will continue to put downward pressure on crude oil prices.
The speculation of slowing demand from China, Europe, the summer driving season nearing an end, and the beginning of refineries’ maintenance season could also add pressure to crude oil prices. All of these factors are fueling negative sentiments and most traders could start increasing their fresh short positions.
The lower crude has led to spending cuts by more than $60 billion in 2015 by major oil companies. Oil companies like BP (BP), Chevron (CVX), and Total (TOT) have announced spending cuts. However, experts believe that these spending cuts won’t be enough as oil hits six-year lows.
WTI prices fell for the sixth time in the last ten trading sessions. During the same period, prices fell by 2% more on the average down days than on the average up days. WTI crude oil prices were among the worst performers in yesterday’s trade. Prices fell by 21.14% YTD (year-to-date) due to increasing supply concerns.