Crude oil price action

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.

October WTI (West Texas Intermediate) crude oil futures contracts trading in NYMEX rose for the second day. Prices rose by 1.08% and closed at $46.75 per barrel on September 3, 2015. US equities’ bullish momentum was reflected in crude oil prices despite oversupply concerns. The US benchmark following ETFs like the United States Oil Fund LP (USO) and the ProShares Ultra DJ-UBS Crude Oil (UCO) followed the direction of crude oil prices in yesterday’s trade. These ETFs rose by 1.66% and 3.34%, respectively, at the close of trade on September 3, 2015.

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Technical catalyst

The bullish momentum and technical catalyst are driving crude oil prices higher. There isn’t a change in the fundamental picture of the crude oil market. US equities gained in yesterday’s trade. It was reflected in the crude oil market. As a result, crude oil prices rallied for the second day. The Chinese market will be closed due to the holidays. It will also have a meager affect on the oil market. China is one of the largest crude oil consumers. Lately, the speculation of a Chinese slowdown is dragging crude oil prices lower. The speculation of an expanding stimulus program from the ECB (European Central Bank) also supported crude oil prices. It could promote economic growth and improve demand for crude oil over the long term.

Fundamental picture

The record inventories from the US, Middle East, Africa, Iran, and China will have long-term negative implications on the crude oil market. The speculation of rising crude oil production from Iran and the Middle East could balance the speculation of slowing US crude oil production in the long term. It means that supply and demand would be far apart. This would put pressure on crude oil prices. Weak demand cues will also add pressure to the crude oil market.

Volatility analysis

Crude oil prices hit 2009 lows of $37.75 per barrel on August 24, 2015. Later, it rallied more than 27% in three trading sessions due to short covering. It’s the biggest three-day rally since the 1990s. September WTI crude oil prices were among the top performers in yesterday’s trade. This is the fifth up day for crude oil prices in the last ten trading sessions. Oil prices rose by 4.30% more on the average up days than on the average down days in the last ten trading sessions. Prices fell by 13.44% YTD (year-to-date)—led by oversupply concerns.

The recent surge in crude oil prices benefits upstream producers like Pioneer Resources (PXD), Hess (HES), and ExxonMobil (XOM). They account for 29.70% of the Energy Select Sector SPDR ETF (XLE). These stocks’ crude oil production mix is more than 49% of their total production.

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