US crude oil inventories

According to the EIA’s (U.S. Energy Information Administration) report on October 5, 2016, US crude oil inventories fell 3.0 MMbbls (million barrels) for the week ended September 30, 2016. Markets expected a rise of 2.4 MMbbls. In the previous week, inventories fell 1.9 MMbbls.

How Inventories and OPEC Decision Are Affecting Crude Prices

The United States Oil (USO) rose 2.3%, and the ProShares Ultra Bloomberg Crude Oil ETF (UCO) rose 4.6% on September 30, 2016, after the announcement of the crude oil inventories report. Crude oil prices (USO) generally react positively to a fall in inventories. On the other hand, a rise in inventories would indicate that the supply glut position is increasing and could add more uncertainty to the movement of crude oil prices.

Crude oil prices touched a five-month high on October 5, 2016, after the announcement of the inventory report. OPEC’s production cut decision also supported the movement of crude oil (UWTI) (DWTI) (BNO).

OPEC decision

On September 28, OPEC announced the outcome of its meeting. OPEC members decided to cut output for the first time in eight years. They decided to cap output at 32.5–33 MMbpd (million barrels per day). However, the market didn’t expect a production cut. Crude oil (UWTI) (BNO) (DWTI) rose more than 5% after the deal was announced.

Francisco Blanch, head of global commodities and derivatives research at Bank of America Merrill Lynch, said that his firm maintains a $61 average crude oil (USO) (UWTI) price forecast for 2017. According to the IEA’s (International Energy Agency) forecast, the world oil demand could be 97.0 MMbpd in 4Q16. In 2Q16, the world’s total oil demand was 95.6 MMbpd. In the same quarter, total crude oil supply was at 95.9 MMbpd. If OPEC limits its production to around 33 MMbpd, we could see a rise in crude oil demand by 1.4 MMbpd in 4Q16 compared to 2Q16. To learn more, read Why the OPEC Agreement Matters to Oil Investors.

If OPEC members can outline and agree to specifics of the production cut at its November meeting, we might see positive movement for crude oil (UCO).

In the next part of this series, we’ll analyze the performance of the non-farm payrolls in September 2016.

Latest articles

This year, Pfizer (PFE) stock has fallen 0.34% and Bristol-Myers Squibb (BMY) stock has fallen 6.48%. Both companies are focused on strengthening their position in the high-growth oncology and immunology markets. Let's take a closer look at each.

Walt Disney’s (DIS) latest movie, Toy Story 4, has reportedly broken records in the opening weekend with $118 million in sales. However, the opening weekend collection was behind analysts’ expectations of at least $150 million in the first weekend.

24 Jun

Will Home Depot’s Upward Momentum to Continue?

WRITTEN BY Rajiv Nanjapla

As of June 21, Home Depot (HD) was trading at $209.39, which implies a rise of 9.7% since the announcement of its first-quarter earnings on May 21. Also, the company was trading at a premium of 32.4% from its 52-week low of $158.09 and a discount of 2.8% from its 52-week high of $215.43.

On June 21, Aurora Cannabis (ACB) made an announcement that indicated that it will move towards higher margin vape products. In addition, the company also believes concentrates and edibles will command higher margins. In anticipation of this development, the company announced the expansion of its facility to capitalize on growth related to these segments.

Shares of Mondelēz International (MDLZ) are scaling new heights thanks to its stellar gains so far this year. Mondelēz stock is up 38.0% on a YTD (year-to-date) basis, and it closed at $55.25—just a shade lower than its 52-week high of $55.71—on June 21.

24 Jun

How Long Will Facebook's Libra Fuel Bitcoin Rally?

WRITTEN BY Mayur Sontakke, CFA, FRM

Ever since the news about Facebook’s (FB) cryptocurrency project broke, Bitcoin has rallied on the hope that Facebook’s entry in the space will help make cryptocurrencies mainstream. Facebook’s cryptocurrency will be called Libra and will be governed by an association with 28 founding members across industries.