Crude oil prices rose
May WTI (West Texas Intermediate) crude oil futures contracts trading in NYMEX rose by 3.3% and settled at $41.1 per barrel on April 19, 2016. Brent crude oil futures trading in ICE also rose by 2.6% and closed at $44 per barrel. Oil prices rallied due to oil workers’ strike in Kuwait. Oil tracking ETFs like the United States Oil Fund (USO) and the ProShares Ultra Bloomberg Crude Oil ETF (UCO) also rose on April 19, 2016. USO and UCO rose by 2.7% and 5.3%, respectively, on the same day.
Oil workers’ strike on April 19
The oil workers’ strike in Kuwait led to a massive decline in oil production. The strike continued for the third straight day. As a result, Kuwait’s crude oil production fell to 1.1 MMbpd (million barrels per day)—compared to 2.8 MMbpd during normal days. The supply disruption could be short-lived. Government officials are in negotiations with oil workers to compromise in order to increase oil exports. Kuwait’s oil strike overshadowed the failure of the Doha meeting. Read Hopes for Oil Producer Meeting Boosted Prices for Last 2 Months and Why Did the Doha Oil Producer Meeting Fail? to learn more.
Strike ended on April 20
In the early hours of Asian trading on April 20, 2016, Kuwait’s oil workers ended their three-day strike temporarily, according to sources from the Oil & Petrochemicals Industries Workers Confederation. Kuwait’s oil minister reported that there wasn’t room for negotiations with the oil workers until they resumed work. The motive of the strike was to cancel the pay cuts to oil workers due to lower oil prices. Crude oil production resuming in Kuwait could put pressure on crude oil prices again.
WTI crude oil futures contracts for May delivery will expire on April 20, 2016. Short covering ahead of expiry also supported crude prices on April 19, 2016. High oil prices impact oil producers like EP Energy (EPE), Denbury Resources (DNR), Goodrich Petroleum (GDP), and Cobalt International Energy (CIE).
Depreciating dollar and global equities
The depreciating US Dollar Index also boosted crude oil prices. The depreciating US dollar makes crude oil cheaper for oil importing countries. The MSCI index tracks stocks across 46 countries. It hit a five-month high. The steady rise in global equity markets also supported crude oil prices. Signs of economic stabilization in China supported the emerging and global equity market rally.
The roller coaster ride in the oil and gas market impacts ETFs like the iShares U.S. Oil Equipment & Services ETF (IEZ), the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the DB Crude Oil Double Short ETN (DTO), and the iShares Global Energy ETF (IXC).
This series focuses on the bullish and bearish catalysts for crude oil prices. We’ll also discuss the American Petroleum Institute’s US crude oil, gasoline, and distillate inventories.