WTI-Brent crude oil prices
WTI (West Texas Intermediate) crude oil prices closed at $32.30 per barrel on January 27, 2016, a rise of 21% compared to the recent low of $26.55 per barrel on January 20, 2016. The crude oil inventory builds of 8.4 MMbbls for the week ending January 22, 2016, didn’t seem to impact prices, as crude oil prices rose 2.7% yesterday from the previous day.
Russia’s production cuts
WTI crude oil prices started 2016 at $36.76 per barrel on January 4 due to continued growth in crude oil inventories. Crude oil prices touched almost 13-year lows to close at $26.55 per barrel on January 20, 2016.
Crude oil prices have gained ~6.4% within the last two days, ignoring the gasoline and crude oil inventory builds. The rise in prices was in part due to discussions between Russian officials and OPEC member countries about cooperation to reduce production levels.
Beginning in the fourth quarter of 2014, crude oil prices (USO) were suffering from the oversupplied global markets. As a result, crude oil prices fell more than 30% in 2015 and more than 65% from peak prices in June 2014. So, this big move from Russia raised hopes among investors that the highly oversupplied market will stabilize from the production cuts.
Russia’s move could stabilize production levels if the deal goes through, which can bring back supplies to normal levels. As a result, prices could rise to yield more revenues for crude oil producers such as Murphy Oil (MUR), Apache (APA), Anadarko Petroleum (APC), Occidental Petroleum (OXY), and Halcón Resources (HK).