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What’s the Key Bearish Catalyst for Crude Oil Prices in 2016?

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Mar. 24 2016, Updated 1:07 p.m. ET

Crude oil drivers  

In this part, we’ll discuss the bearish drivers for crude oil prices in 2016.

What's the Key Bearish Catalyst for Crude Oil Prices in 2016?

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Bearish drivers for crude oil prices 

  • Global crude oil inventories are more than 3 billion barrels. US crude oil inventories are 100 million barrels more than the five-year average. Read more about the American Petroleum Institute’s crude oil inventory estimates in the next part of the series.
  • Iran is the third-largest oil producer among OPEC’s (Organization of the Petroleum Exporting Countries) members. Iran is ramping up its crude oil production by 1 MMbpd to 4 MMbpd in 2016. To learn more, read Iran’s Crude Oil Production: Biggest Gain in Almost 2 Decades.
  • The demand concerns due to weak European and Japanese economies could also have a negative impact on crude oil prices.
  • OPEC reported that Chinese crude oil demand grew by 0.33 MMbpd in 2015. It’s expected to increase by 0.29 MMbpd in 2016. The expectation of slowing Chinese oil demand growth will limit the rally for crude oil prices.
  • China’s exports hit six-year lows in February 2016. It’s reflecting weakness in the global economy. Global oil consumption could slow down due to the slowing global economy. To learn more, read China’s Crude Oil Imports Could Impact Crude Oil Prices. 

Impact on stocks and ETFs 

Multiyear low crude oil prices have a negative impact on crude oil exploration and production companies like National Iranian Oil Company, Comstock Resources (CRK), Northern Oil & Gas (NOG), and Triangle Petroleum (TPLM). ETFs and ETNs like the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the Fidelity MSCI Energy (FENY), the ProShares Ultra Oil & Gas (DIG), and the VelocityShares 3x Inverse Crude Oil ETN (DWTI) are also impacted by the ups and downs in the crude oil market.

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