Bullish crude oil drivers
In this part, we’ll also focus on the bullish crude oil catalyst that we covered in the previous part of the series.
Bullish drivers for crude oil prices
- Slowing global crude oil production drove crude oil prices in the last two months as oil prices test 2016 highs. To learn more, read Why Key Oil Producers Are Slowing Their Production.
- OPEC’s (Organization of the Petroleum Exporting Countries) March 2016 report stated that India’s crude oil demand rose by 0.5 MMbpd (million barrels per day) to 4.54 MMbpd in January 2016—compared to January 2015. This is a 13% rise year-over-year. The rise was led by strong demand for gasoline, fuel oil, and diesel oil. The consensus of rising crude oil imports from India will likely support crude oil prices.
- West Texas Intermediate December 2020 crude oil futures contracts were trading at $50.13 per barrel as of March 23, 2016. The forward curve suggests higher crude oil prices in the future.
- The International Energy Agency reported that global supplies fell by 180,000 barrels per day to 96.5 MMbpd in February 2016 compared to the previous month.
- OPEC reported that global oil demand grew by 1.5 MMbpd to 92.3 MMbpd in 2015. Demand is expected to grow by 1.3 MMbpd to 94.2 MMbpd in 2016.
Impact on oil stocks and ETFs
Bullish crude oil prices benefit upstream companies like Matador Resources (MTDR), SM Energy (SM), Warren Resources (WRES), and Bonanza Creek Energy (BCEI). They also support Middle East oil producers like Saudi Aramco and Kuwait Petroleum Company.
The volatility in oil prices impacts ETFs and ETNs like the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the Direxion Daily Energy Bull 3x Shares ETF (ERX), and the ProShares Ultra Oil & Gas (DIG).
In the next part of the series, we’ll cover the bearish catalyst for crude oil prices.