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Why Crude Oil Prices Rose 84% since the Lows in February 2016

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Bullish crude oil price drivers 

Let’s take a look at some key bullish drivers for crude oil prices in the past two months.

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Bullish drivers for crude oil prices   

Global supply outages could be around 3.5 MMbpd (million barrels per day), according to estimates from Citigroup.

  • The Canadian wildfire might have impacted crude oil production by 1.2 MMbpd (million barrels per day). To learn more, read the previous part of the series.
  • Political unrest in Libya led to a decline in the country’s crude oil production.
  • Barclays reported that Nigeria’s crude oil production is down by 300,000 bpd (barrels per day) in 2016 at 1.6 MMbpd. It’s the lowest level in 22 years.
  • The supply outage in Venezuela also supported crude oil prices.
  • The three-day oil worker strike in Kuwait brought crude oil production down from 2.8 MMbpd to 1.1 MMbpd on April 20. It also supported crude oil prices. Read Crude Prices Rose Due to Supply Outage in Kuwait: What’s Next? to learn more about these drivers.

Slowing US crude oil production

US crude oil production fell to the lowest levels since September 2014. It fell by 23,000 bpd to 8.8 MMbpd for the week ending May 6 from the previous week. This is 6% less than the same period in 2015. Read US Crude Oil Production Fell for 15th Straight Week: What’s Next? for the latest on US crude oil production.

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Gasoline demand

The four-week average gasoline demand rose slightly by 6,000 bpd to 9.5 MMbpd for the week ending May 6—compared to the previous week. It’s 5.3% more than the same period in 2015. The gasoline demand is expected to rise during the summer driving season by 1.4% year-over-year to record levels in 2016. Multiyear low gasoline prices motivated drivers to buy more trucks and sport utility vehicles. These vehicles consume more gasoline than other vehicles. Improvement in the labor market also motivated drivers to buy more vehicles. Milder-than-normal weather supported US drivers to drive more in early 2016. The expectations of a rise in the gasoline demand should support gasoline and crude oil prices. For more on gasoline inventories, see the final part of this series.

Impact on energy companies and ETFs 

The recent surge in crude oil prices impacts oil and gas producers like Energy XXI (EXXI), Bonanza Creek Energy (BCEI), PDC Energy (PDCE), and Carrizo Oil & Gas (CRZO). Volatile oil and gas prices also impact ETFs and ETNs like the United States Brent Oil ETF (BNO), the DB Crude Oil Double Short ETN (DTO), the ProShares Ultra Oil & Gas (DIG), and the ProShares UltraShort Bloomberg Crude Oil ETF (SCO).

Read the next part of this series to learn more about bullish drivers for crude oil prices over the long term.

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