Crude oil prices fell
March WTI (West Texas Intermediate) crude oil futures contracts trading in NYMEX fell by 1.4% and settled at $29 per barrel on February 16, 2016. Similarly, Brent crude oil prices trading in ICE fell by 3.5% and closed at $32.18 per barrel. Crude oil prices fell as the deal between OPEC (Organization of the Petroleum Exporting Countries) kingpin Saudi Arabia and Russia would freeze crude oil production at January 2016 levels if other oil exporting giants joined the deal. Oil tracking ETFs like the United States Oil Fund (USO) and the ProShares Ultra Bloomberg Crude Oil ETF (UCO) also moved in the direction of crude oil prices. They fell by 0.2% and 2.2%, respectively, in yesterday’s trade. The SPDR S&P 500 ETF (SPY) moved against oil prices and rose by 1.7% on February 16.
Russia, Saudi Arabia, Venezuela, and Qatar held a meeting in Doha on February 16, 2016, to discuss the collective production cut. The meeting was partially successful. Saudi Arabia and Russia entered into an accord to freeze crude oil production at January 2016 levels if other oil exporting giants joined the deal. There wasn’t a discussion about curbing production. Saudi Arabia and Russia’s current crude oil production are close to peak levels. So, the Market didn’t appreciate the historic deal. Oil prices fell during trade on February 16. To learn more about the bearish catalysts of oil production, read Saudi Arabia’s Crude Oil Production: Key for the Global Oil Market and OPEC Crude Oil Production Is Breaking Records. Also, read Russia’s Production Will Put More Pressure on the Crude Oil Market. In the next part, we’ll discuss the deal and Saudi Arabia’s future plans.
Oil producers and ETFs
Long-term lower oil prices will impact oil producers like Hess (HES), Energen (EGN), Laredo Petroleum (LPI), and Pioneer Natural Resources (PXD). In contrast, lower oil benefits refiners such as Valero Energy (VLO), HollyFrontier (HFC), Marathon Oil (MPC), and Phillips 66 (PSX).
The volatility in oil prices impacts oil and gas ETFs and ETNs like the VelocityShares 3X Inverse Crude Oil ETN (DWTI), the Vanguard Energy ETF (VDE), the VanEck Vectors Oil Refiners ETF (CRAK), and the iShares U.S. Energy (IYE).