Crude oil price drivers
In this part of the series, we’ll discuss the key bullish drivers for crude oil prices.
Bullish drivers for crude oil prices
- Crude oil supply outages in Iraq and Nigeria have been boosting crude oil prices in March 2016. Supply outages increased by 0.25 MMbpd (million barrels per day) in March 2016—compared to the previous month. As a result, oil prices are trading at 2016 highs. To learn more, read Crude Oil Production Outages: Key Driver for Crude Oil Prices.
- On March 21, 2016, OPEC’s (Organization of the Petroleum Exporting Countries) Secretary General Abdalla El-Badri stated that 15–16 oil producers will meet in Doha on April 17, 2016. The meeting will renew talks to stabilize the oil market. Some OPEC members might not participate in the meeting but all of them have been invited. He also stated that oil prices are trading at 2016 highs. So, we could see a moderate gain for oil prices. To learn more, read How the Crude Oil Market Could React to the Doha Oil Producers Meeting.
- In a similar initiative, Latin American oil producers—Venezuela, Colombia, Ecuador, and Mexico—were scheduled to meet in Quito on March 11, 2016, to discuss stabilizing oil prices. It’s expected to be scheduled for late March 2016 or early April due to scheduling difficulties.
- Weekly US crude oil production fell slightly by 10,000 barrels per day to ~9.1 MMbpd in the week ending March 11, 2016. This is the lowest level since November 14, 2014. Market surveys project that the US crude oil production will decline by 0.42 MMbpd to 0.7 MMbpd in 2016 from 2015. The expectation of slowing US crude oil production could benefit crude oil prices. To learn more, read Understanding the Low Level of US Crude Oil Production.
Impact on oil stocks and ETFs
The recent crude oil bull market supports crude oil and gas exploration and production companies like Halcón Resources (HK), Matador Resources (MTDR), SM Energy (SM), Sanchez Energy (SN), Energy XXI (EXXI), and Goodrich Petroleum (GDP). The uncertainty in oil and gas prices impacts ETFs like the ProShares Ultra Bloomberg Crude Oil ETF (UCO), the Direxion Daily Energy Bull 3x Shares ETF (ERX), and the ProShares UltraShort Bloomberg Crude Oil ETF (SCO).
Read the next part of the series to learn more about bullish crude oil drivers.