Crude Oil Prices Have Fallen 11% since October 9

Crude oil prices

December WTI (West Texas Intermediate) crude oil futures contracts trading in NYMEX fell by 1.4% and settled at $43.98 per barrel on Monday, October 26, 2015. Prices fell for the second day due to the rising refined products inventory and oversupply concerns. The US benchmark following ETFs like the United States Oil ETF (USO) and the ProShares Ultra DJ-UBS Crude Oil ETF (UCO) followed the price trajectory of crude oil prices in Monday’s trade. These ETFs fell by 1.8% and 3.3%, respectively, at the close of trade on October 23, 2015.

[marketrealist-chart id=758694]

Global inventory and refined products inventory 

The record global inventory across the US, Saudi Arabia, Europe, and China is weighing on the depressed crude oil market. Similarly, refined products’ inventory across the European ports and Chinese markets is also adding pressure to the crude oil market. Some oil traders speculate that refined products’ storage tanks have reached their capacity. As a result, many oil tankers in Europe are waiting at the European ports. The unaccounted crude oil stocks in the large super tankers will also continue to put pressure on the global oil market. As a result, crude oil prices fell almost 11% in the last two weeks. Crude oil prices’ collateral damage impacts oil producers like Swift Energy (SFY), Energy XXI (EXXI), Halcon Resources (HK), and Goodrich Petroleum (GDP). 

Seasonal refinery maintenance 

Seasonal refinery maintenance in the US will curb the average demand for crude oil from crude oil refineries. The end of the summer driving season will also curb the demand for refined products like gasoline. As a result, crude oil prices will be under downward pressure. The falling crude oil prices will also impact ETFs like the Vanguard Energy ETF (VDE) and the iShares US Oil Equipment & Services ETF (IEZ).

Record production

OPEC’s (Organization of Petroleum Exporting Countries) kingpin is Saudi Arabia. Russia and Saudi Arabia continued to produce more than 10 MMbpd (million barrels per day) of crude oil in September 2015. They’re expected to produce more than 10 MMbpd in October 2015. These oil exporting giants are producing more oil to offset lower crude oil prices. As a result, the markets are oversupplied. This is weighing on crude oil prices.

Volatility 

This is the fifth down day for crude oil prices in the last ten trading sessions. During the same period, prices rose by 0.9% more on the average up days than on the average down days. Crude oil was among the worst performers against other commodities in yesterday’s trade. The US WTI prices fell more than 17% YTD (year-to-date) due to the wide gap between supply and demand.

In this series, we’ll look at crude oil prices and fundamentals. For an in-depth fundamental look at oil and gas and related companies, sectors, and drivers, visit Market Realist’s Energy and Power page.