Crude oil prices fall again
June WTI (West Texas Intermediate) crude oil futures contracts fell 2.5% and closed at $43.65 per barrel yesterday. Brent crude oil futures fell 2.8% and settled at $46.75 per barrel. Prices fell due estimates of rising US crude oil inventories and an appreciating US dollar index. The United States Oil ETF (USO) and the ProShares Ultra Bloomberg Crude Oil (UCO) fell 2.8% and 5.2%, respectively.
US dollar index
The US dollar index appreciated 0.3% and was trading at 92.9. The US dollar is inversely related to crude oil. The appreciating US dollar makes crude oil expensive for oil importing countries. Meanwhile, the index fell to 91.9 on May 2—the lowest since January 2015. Dovish comments from the Federal Reserve led to the depreciation of the US dollar. Secondly, the US GDP grew 0.5% in Q1 2016 versus 1.4% in Q4 2015, according to the US Bureau of Economic Analysis sources. It was below market expectations for 0.7% growth. This is the weakest performance in the last two years.
OPEC crude oil production
OPEC’s (Organization of the Petroleum Exporting Countries) crude oil output increased by 484,000 bpd (barrels per day) to 33.22 MMbpd (million barrels per day) in April 2016 from March 2016. To learn more, read OPEC Crude Oil Production Data Ignites Concerns of Oversupply.
The rise in crude oil production in the oversupplied market hurts crude oil prices. Low crude oil prices affect oil producers like Halcón Resources (HK), Matador Resources (MTDR), Goodrich Petroleum (GDP), and Cobalt International Energy (CIE).
Chinese manufacturing data
China is the second-largest crude oil consumer in the world. China’s Caixin manufacturing PMI fell to 49.4 in April 2016 from 49.7 in March 2016. China’s PMI fell for the fourteenth consecutive month. Demand concerns also pressured crude oil prices.
Crude oil price volatility
WTI and Brent crude oil prices hit 2016 highs on April 28. They fell for the third day since April 29. Follow this series to learn about bullish and bearish catalysts for crude oil prices. We’ll also look at the American Petroleum Institute’s US crude oil, gasoline, and distillate inventories in the last two parts of this series.
Volatility in the oil and gas market impacts ETFs such as the Direxion Daily Energy Bear 3X (ERY), the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the iShares Global Energy ETF (IXC), and the Fidelity MSCI Energy (FENY).