Oil producers’ meeting
On March 7, 2016, Ecuador’s government reported that oil exporting countries like Venezuela, Colombia, Ecuador, and Mexico would meet on March 11, 2016, in Quito, Ecuador. Together, these countries export ~4 million barrels per day of crude oil. The meeting will focus on stabilizing oil prices. The prices have fallen almost 65% since June 2014. Oil prices fell due to supply outpacing demand. Read more about the current supply and demand gap in Part 6 of this series. Venezuela and Ecuador are members of OPEC (Organization of the Petroleum Exporting Countries). Colombia, Mexico, and Russia aren’t members of OPEC. The mammoth fall in oil prices led to the massive decline in revenue for these economies. They depend on oil exports.
The oil exporters’ meeting in Quito, Ecuador, is scheduled ahead of OPEC’s meeting with Russia on March 20, 2016. Nigeria’s petroleum minister Emmanuel Kachikwu stated that this meeting will renew talks to strategize the recently concluded crude oil production deal between Russia, Saudi Arabia, Venezuela, and Qatar. On February 16, the countries decided to freeze the crude oil production at January 2016 levels. This new crude oil production deal is also driving oil prices higher. To learn more about the historic deal, read Why Crude Oil Prices Fell despite the OPEC and Non-OPEC Deal. You can also read Did Saudi Arabia Keep Its Word and Freeze Crude Oil Production? and Why OPEC’s Crude Oil Production Fell in February 2016. To learn more about Russia’s crude oil production, read Part 5 of this series.
US dollar and crude oil
The US Dollar Index (DXY) depreciated against global currencies. It hit a two-week low. The dollar fell by 0.2% on March 7, 2016, due to the fall in US wages in February 2016. The U.S. Department of Labor reported that average hourly earnings fell by $0.03 in February 2016—compared to the previous month. Weak wages suggest that the Fed might delay the rate hike. As a result, the dollar fell during trade on March 7. The PowerShares DB US Dollar Index Bullish (UUP) also fell by 0.2% to $25.2 at the close of trade on March 7, 2016. Crude oil is inversely related to the US dollar. The deprecation of the US dollar makes crude oil more affordable for oil importing economies in their local currency. To learn more about crude oil’s price action, read the previous part of the series.
ETFs and ETNs like the iShares Global Energy ETF (IXC), the iShares U.S. Energy ETF (IYE), the iShares U.S. Oil Equipment & Services ETF (IEZ), and the VelocityShares 3x Long Crude Oil ETN (UWTI) are influenced by volatility in crude oil prices.
Read the next part of the series to learn more about the American Petroleum Institute’s crude oil inventory report.