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Crude Oil Prices Hit $43 Level Due to Slowing Demand Concerns

Gordon Kristopher - Author
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Nov. 20 2020, Updated 2:18 p.m. ET

Crude oil prices fell for the third day

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 for September delivery fell by 1.76% and settled at $43.87 per barrel on August 7, 2015. Prices are trading close to March 2015 levels due to gasoline inventory buildup and long-term oversupply concerns. ETFs like the United States Oil Fund LP (USO) and the ProShares Ultra DJ-UBS Crude Oil (UCO) also mirrored the price trajectory of US crude oil prices in Friday’s trade. These ETFs fell by 2.08% and 3.96%, respectively, at the close of trade on August 7, 2015.

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The consensus of rising crude oil production from the US, due to the rising crude oil rigs, is fueling negative sentiments about an extension of the crude oil glut markets for several years. Crude oil rigs have risen despite the carnage in the crude oil market.

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Last week, the EIA (U.S. Energy Information Administration) reported that the gasoline inventories rose by 0.811 MMbbls (million barrels) for the week ending July 31, 2015—compared to the market surveys of a fall in the inventories by 0.50 MMbbls. The rise in refined products’ inventories signifies that retail demand is slowing due to the summer driving season nearing an end.

Second, the refineries’ maintenance time is also starting. It could also slow down the refinery demand and negatively affect oil prices.

Third, the Chinese stock market has fallen more than 14% in July 2015. These bearish sentiments could slow down the future crude oil demand from China. China is the largest crude oil importer. It’s the second largest crude oil consumer.

Goldman Sachs reported that crude oil market has a surplus of 2 MMbpd (million barrels per day) due to record production from the US to the Middle East. The massive production consensus will continue to add pressure to the crude oil market.

The strengthening US Dollar Index is also adding pressure to crude oil prices. The dollar-denominated crude oil prices fell as it becomes expensive for oil importing nations due to the strong dollar.

The latest data from the CFTC (Commodity Futures Trading Commission) highlights that speculative traders have marginally increased their bullish bets or positions. However, they’re still close to the five-year lowest levels of long positions.

The collateral damage in oil prices impacts companies like Apache (APA), Anadarko Petroleum (APC), and ConocoPhillips (COP). They account for 7.39% of the Energy Select Sector SPDR ETF (XLE). These companies’ crude oil production mix is more than 41% of their total production.

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