uploads///WTI Brent Price Movements

What Caused WTI Prices to Fall?


Nov. 18 2015, Published 9:35 a.m. ET

Crude oil prices

WTI (West Texas Intermediate) crude oil prices closed at $42.06 per barrel on Monday, November 16. WTI oil futures snapped last week’s losing streak. Crude oil price rose by 3.2% on November 16 compared to prices of $40.74 per barrel on November 13.

Brent crude oil prices closed at $44.86 per barrel on November 16. The prices rose by 2.9% compared to $43.61 per barrel on November 13. On November 16, Brent crude oil prices were 4.9% less than the price of $47.19 per barrel on November 9.

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Weekly recap

Last week, oil prices saw tremendous pressure because of massive stockpiles on land and at sea. This led to the biggest weekly losses in crude oil prices in the last eight months.

In the past two weeks, crude oil inventories in the US saw larger-than-expected growth. Last week, analysts expected inventories to rise by 1 MMbbls (million barrels). The API (American Petroleum Institute) reported a rise of 6 MMbbls on November 11. The EIA (U.S. Energy Information Administration) reported a rise of 4.2 MMbbls on November 12. These reports caused crude oil prices to fall in the last week.

Along with these reports, the IEA (International Energy Agency) reported that OECD (Organization for Economic Cooperation and Development) crude oil stocks stood near 3 billion barrels in September. This created fear in the market. It caused WTI prices to fall more on November 13.

On November 16, crude oil prices rose more than 3%. However, the rally could be short. It was due to the value additions to brokers who bet on lower prices. They finished those positions.

What’s the impact?

The fall in the crude oil prices (USO) is negative for oil producers. Due to low crude oil prices, oil producers’ revenue like Occidental Petroleum (OXY), Murphy Oil (MUR), Cimarex Energy (XEC), Hess (HES), Diamondback Energy (FANG), and ConocoPhillips (COP) will fall. This lead to low profit margins for the oil producers.

Some of the companies mentioned above are part of ETFs like the SPDR S&P Oil & Gas Exploration & Production (XOP), the iShares U.S. Energy ETF (IYE), and the iShares Global Energy ETF (IXC).


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