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Crude Oil Prices Rose before Saudi Arabia and Russia’s Talks

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Sep. 6 2016, Published 9:45 a.m. ET

Crude oil prices  

October West Texas Intermediate crude oil futures contracts rose by 1.8% and were trading at $44.24 per barrel in electronic trade on September 5, 2016. Prices rose despite doubts about major oil producers’ meeting meant to stabilize the oil market. Brent crude oil futures also rose by 1.5% and were trading at $49.92 per barrel.

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Saudi Arabia and Russia’s agreement 

The US equity and options markets were closed on September 5, 2016, due to the Labor Day holiday. However, crude oil prices rose by 4.7% in electronic trade during early trade on September 5, 2016, before Saudi Arabia and Russia’s agreement talks to stabilize the oil market at the G20 meeting in China.

Russian news agency Interfax reported that Russia and Saudi Arabia would form a working committee to track developments in the oil markets. This working committee would draft recommendations for investments and stability in the oil market. Russia and Saudi Arabia agreed to exchange new technologies in the oil and gas industries.

Russian Energy Minister Alexander Novak said that a crude oil production freeze is the only strategy that could support oil prices and stabilize the oil market. He also hinted that major oil producers should agree to stabilize the oil market. For more on oil producers’ meeting, read the next part of the series.

Saudi Arabia’s energy minister said that a crude oil production freeze wasn’t required right now. This raised concerns about the success of oil producers’ meeting. As a result, crude oil prices trimmed gains in the latter half of the day on September 5 after Saudi Arabia and Russia’s agreement.

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US Dollar Index

The Bloomberg US Dollar Index fell by 0.2% on September 5, 2016. It supported crude oil prices on the same day. The US dollar and crude oil are usually inversely related. The depreciation of the US dollar makes crude oil more affordable for oil importers and vice versa.

Impact on stocks and ETFs 

Volatility in crude oil prices impacts oil and gas exploration and production companies’ earnings such as Comstock Resources (CRK) and Sanchez Energy (SN).

It also impacts ETFs and ETNs such as the DB Crude Oil Double Short ETN (DTO), the Direxion Daily Energy Bear 3x (ERY), the United States Oil ETF (USO), the ProShares Ultra Bloomberg Crude Oil (UCO), and the United States Brent Oil ETF (BNO). 

What’s in this series?  

This series will focus on oil producers’ meeting. We’ll discuss the crude oil production in Saudi Arabia, Russia, and the US ahead of oil producers’ meeting and how they impact the oil market. We’ll also look at some crude oil price forecasts.

Let’s start with US crude oil prices during early morning trade on September 6, 2016.

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