Bullish drivers for crude oil prices
In this part of the series, we’ll look at why Asian economies like China and India are important for crude oil prices over the long term.
Bullish catalysts for crude oil prices
- India’s Petroleum, Planning, and Analysis Cell reported that India’s crude oil demand rose by 0.4 MMbpd (million barrels per day) in April 2016 compared to last year. It’s 10% higher than the same period in 2015. India’s crude oil consumption averaged around the historic peak of 4.6 MMbpd in April 2016. The demand for fuel oil and gasoline rose by 29% and 12% year-over-year. The rise in demand was due to the improvement in the economy, lower oil prices, and improvement in income levels. To learn more, read India’s Crude Oil Demand Will Likely Drive the Crude Oil Market.
- China’s General Administration of Customs reported that China’s crude oil imports averaged 7.6 MMbpd in May 2016. It’s 39% higher than the same period in 2015. However, imports declined in May 2016 compared to April 2016 due to refinery maintenance and congestion in ports. China imported 8 MMbpd of crude oil in April 2016. Market surveys project that China’s crude oil demand will average at 7.4 MMbpd over the next six months due to demand from teapot refineries. The slowing Chinese crude oil production will also add to the imports. The EIA (U.S. Energy Information Administration) estimates that China is planning to build 500 MMbbls (million barrels) of strategic crude oil reserve space by 2020. This will also add to the imports.
- South Korea’s crude oil imports rose to 90.7 MMbbls in May 2016—compared to 89.7 MMbbls in April 2016, according to the Ministry of Trade in South Korea. However, it’s 6.1% less than the same period in 2015. South Korea’s crude oil imports were at 96.6 MMbbls in May 2015.
- West Texas Intermediate crude oil futures contracts for December 2020 delivery were trading at $54.97 per barrel on June 22, 2016. The forward curve suggests higher crude oil prices in the future.
- The International Energy Agency and Goldman Sachs estimate that the global oversupply of crude oil will diminish in 2016. Read Will Crude Oil’s Supply and Demand Balance Narrow or Widen? to learn more.
Impact on energy stocks and ETFs
Volatility in crude oil prices impacts oil and gas exploration and production companies like Stone Energy (SGY), Triangle Petroleum (TPLM), and Northern Oil & Gas (NOG). It also impacts ETFs and ETNs like the ProShares UltraShort Bloomberg Crude Oil ETF (SCO) and the ProShares Ultra Bloomberg Crude Oil (UCO).
In the next part of this series, we’ll look at some key bearish drivers for crude oil prices.