Bullish drivers for crude oil demand
In this part of the series, we’ll look at India’s importance in regards to crude oil demand along with other bullish factors over the long term.
Bullish catalysts for crude oil prices
- India’s Petroleum, Planning, and Analysis Cell reported that India’s crude oil consumption was at 48.5 million tons between April 2016 and June 2016, which is 7.8% more than in the corresponding period in 2015. The improving economic growth supported crude oil demand in India.
- India’s diesel demand grew by 4.7% to 20.1 million tons between April 2016 and June 2016 compared to the same period in 2015. Likewise, gasoline consumption grew by 10% to 5.9 million tons for the same period. To learn more, read India’s Crude Oil Demand Will Likely Drive the Crude Oil Market.
- China Association of Automobile Manufacturers reported that vehicles sales in China rose by 14.6% to 2.1 million units in June 2016 compared to the corresponding month in 2015, which could support crude oil and refined product demand.
- Slowing Chinese crude oil production will also add to imports. Market surveys project that China’s crude oil imports will average 7.4 MMbpd over the next six months due to demand from teapot refineries. The 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 change will also add to imports.
- December 2020 West Texas Intermediate crude oil futures contracts were trading at $56.91 per barrel on July 13, 2016. The forward curve suggests higher crude oil prices in the future.
Impact on energy stocks and ETFs
Volatility in crude oil prices affects oil and gas exploration and production companies like Synergy Resources (SYRG), Comstock Resources (CRK), Ultra Petroleum (UPL), and Whiting Petroleum (WLL). It also impacts ETFs and ETNs like the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the Guggenheim S&P 500 Equal Weight Energy ETF (RYE), and the United States Brent Oil ETF (BNO).
In the next two parts of this series, we’ll look at some key bearish drivers for crude oil prices.