Crude oil prices fall again
December WTI (West Texas Intermediate) crude oil futures contracts trading in NYMEX fell by 2.6% and closed at $40.67 per barrel on Tuesday, November 17, 2015. Prices resumed a downward trend due to the consensus of the rising crude oil inventory. 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. These ETFs fell by 2.8% and 5.8%, respectively, on November 17, 2015.
On November 17, 2015, the API (American Petroleum Institute) published its weekly crude oil inventory report. The data highlighted that crude oil stocks fell by 0.48 MMbbls (million barrels) for the week ending November 13, 2015. The EIA (U.S. Energy Information Administration) will release its weekly crude oil inventory report on November 18, 2015. Market surveys project that crude oil stocks could rise by 2 MMbbls for the same period. The consensus of rising crude oil stocks weighed on crude oil prices in yesterday’s trade. As a result, crude oil prices fell during Tuesday’s trade. To learn more about the inventory, visit the next part of the series. The rising global inventory and wider contango benefits crude oil tanker companies like DHT Holdings (DHT), Teekay Tankers (TNK), Nordic American Tanker (NAT), and Frontline (FRO).
The US Dollar Index appreciated against the basket of global currencies in yesterday’s trade. The US Dollar Index rose by 0.2% against the global currencies. However, it hit a seven-month high against the euro and a three-month high against the yen in yesterday’s trade. The US dollar appreciated due to the consensus of a rate hike by the Fed in December 2015. The US CFTC (Commodity Futures Trading Commission) released its weekly COT (Commitment of Traders) report on November 16, 2015. The data highlighted that hedge funds increased their long position to $33.3 billion between the second week of October 2015 and the week ending November 10, 2015. The appreciating US dollar will weigh on dollar-denominated crude oil. As a result, we could see more bloodbaths in the oil market.
Strike at Petrobras could end
Brazil’s premier oil and gas producer Petrobras (PBR) could end its strike, according to the latest developments from the company. The strike started on November 9, 2015. It caused the company’s oil production to fall by 100,000 bpd (barrels per day). The oil company’s employees went on strike due to the company’s initiative to lay off employees and reduce salaries due to heavy debt and lower oil prices. The latest news from the employees union suggests that Petrobras agreed not to scale down the salaries. Resuming the oil production will add to the glut.
US crude oil prices fell 23% YTD (year-to-date) due to oversupply concerns. The uncertainty in the oil market impacts ETFs like the iShares US Oil Equipment & Services ETF (IEZ) and the PowerShares DWA Energy Momentum ETF (PXI).
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.