Crude oil price drivers
Having looked at bullish catalysts for crude oil prices in the previous parts of this series, we’ll now cover the major bearish factors for crude oil prices in 2016.
Bearish factors for crude oil prices
- Earlier today, Iran’s oil minister reported that crude oil production from Iran will rise to 4 MMbpd by March 2017. Iran will be positioned to export 2.3 MMbpd of crude oil in March 2017 compared to 2 MMbpd in March 2016. To learn more, read How Iran’s Production Was a Turning Point for Crude Prices in 2016.
- The EIA (U.S. Energy Information Administration) reported that US crude oil inventories are 100 MMbbls more than the five-year average. The IEA (International Energy Agency) reported that global crude oil inventories have reached more than 3.0 billion barrels. To learn more, read How Global Crude Oil Inventory Will Limit the Upside for Crude Oil.
- The rising US dollar, as a result of expected interest rate hikes by the Fed in 2016, could put pressure on crude oil prices.
- Oil prices have rallied more than 40% since the lows reached in February 2016. Traders could square off their long positions as part of profit-booking. To learn more about the latest crude oil prices, read part 1 of this series.
Impact on energy stocks and ETFs
Multiyear low crude oil prices affect domestic and international oil producers like National Iranian Oil Company, CNOOC (CEO), China Petroleum & Chemical Corporation (SNP), PetroChina (PTR), and Triangle Petroleum (TPLM). Oil and gas prices also affect ETFs and ETNs like the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the United States Oil Fund (USO), the PowerShares DWA Energy Momentum Portfolio (PXI), the DB Crude Oil Double Short ETN (DTO), the Direxion Daily Energy Bear 3x ETF (ERY), and the United States Brent Oil Fund (BNO).
In the last two parts of this series, we’ll discuss the API’s (American Petroleum Institute) crude oil, gasoline, and distillate inventory estimates.