uploads/2016/01/WTI-Brent-Crude-Oil-Price-Movements-2016-01-061.jpg

US Dollar and Cushing Inventories Impacted WTI Crude Oil Prices

By

Updated

WTI-Brent crude oil prices

WTI (West Texas Intermediate) crude oil prices closed at $35.80 per barrel on January 5, 2016. They fell by ~3.3% on January 5—compared to prices at $37.04 per barrel on December 31. Brent crude oil prices also fell by ~2.5% on January 5—compared to prices at $37.28 per barrel for the week ending December 31. Brent crude prices closed at $36.31 per barrel on January 5.

Article continues below advertisement

US Dollar Index rose

Crude oil inventories fell by 5.6 MMbbls for the week ending January 1, as reported by the API (American Petroleum Institute). When crude oil inventories fall, WTI crude oil prices will rise. However, WTI prices fell by 2.2% on January 5.

The crude oil prices mainly fell due to a rise in the US Dollar Index compared its basket of currencies and a rise in Cushing crude oil inventories.

The US Dollar Index rose by 0.55% on January 5. The Eurozone’s annual inflation rate rose by 0.2% in December. Chinese stock market losses and stagnant global economic growth pushed the US Dollar Index. When the US Dollar Index rises, dollar-denominated commodities like crude oil become more expensive to hold. As a result, traders exist and prices fall.

According to Genscape, the crude oil inventories at Cushing are at an all-time high as of the week ending January 1. They’re roughly more than 347,000 barrels. The rise in Cushing crude inventories raised concerns about demand growth. As a result, WTI prices settles down at 2.2% on January 5 even though there’s a decline in crude oil inventories.

Impact

The fall in the crude oil prices (USO) decreases the revenue for crude oil producers. When the revenue decreases, the operational cost will increase. The increase in the operational cost decreases crude oil producers’ profitability like Apache (APA), Anadarko Petroleum (APC), Chesapeake Energy (CHK), Cimarex Energy (XEC), Devon Energy (DVN), and Murphy Oil (MUR).

Advertisement

More From Market Realist