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How Could China and India Support Crude Oil Prices?


Nov. 20 2020, Updated 5:12 p.m. ET

Crude oil price catalysts

In this part, we’ll discuss some more bullish catalysts for crude oil prices. We’ll focus on China, Brazil, and India.

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Bullish catalysts for crude oil prices  

  • Slowing non-OPEC crude oil production would support crude oil prices in 2016. To learn more, read Non-OPEC Crude Oil Production Impacts Crude Oil Prices.
  • The rise in Chinese crude oil imports also boosted crude oil prices in March 2016. Chinese crude oil imports are expected to rise more due to slowing Chinese crude oil production and the stabilizing Chinese economy. Read China Crude Imports Hit Record: How Will It Affect Global Market? to learn more.
  • The International Energy Agency forecast that India and China will play a vital role in driving crude oil demand. India will surpass Japan as the third-largest crude oil consumer in 2016. India’s crude oil consumption will grow to 4.2 MMbpd (million barrels per day) in 2016—compared to 4.1 MMbpd for Japan in 2016. It also forecast that India’s crude oil consumption growth rate will be the highest by 2040. To learn more, read India’s Crude Oil Demand Will Likely Drive the Crude Oil Market.
  • Brazil’s crude oil output fell by 0.9 MMbpd over the past six months due to huge debt, corruption scandals surrounding Petróleo Brasileiro Petrobras (PBR), and lower crude oil prices. To learn more, read Why Key Oil Producers Are Slowing Their Production.
  • West Texas Intermediate crude oil futures contracts for December 2020 delivery were trading at $49.52 per barrel on April 20, 2016. The forward curve suggests higher crude oil prices in the future. 

Impact on stocks and ETFs 

High crude oil prices have a positive impact on oil and gas producers like Ultra Petroleum (UPL), Northern Oil & Gas (NOG), Denbury Resources (DNR), and SM Energy (SM).

The uncertainty in oil prices impacts ETFs and ETNs like the DB Crude Oil Double Short ETN (DTO), the ProShares Ultra Oil & Gas (DIG), the iShares U.S. Oil Equipment & Services ETF (IEZ), the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), and the Guggenheim S&P 500 Equal Weight Energy ETF (RYE).

In the next part of this series, we’ll look at bearish drivers for oil prices.


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