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Crude Oil Traders Are Skeptical about OPEC Production Cap Plans

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Dec. 4 2020, Updated 10:52 a.m. ET

Crude oil prices  

WTI (West Texas Intermediate) crude oil futures contracts for November delivery fell 1.1% and closed at $50.79 per barrel on October 11, 2016. Brent crude oil futures fell 1.4% and settled at $52.41 per barrel.

Crude oil prices fell due to skepticism around OPEC‘s (Organization of the Petroleum Exporting Countries) plans to cap production. The United States Oil ETF (USO) and the ProShares Ultra Bloomberg Crude Oil (UCO) fell 0.8% and 1.4%, respectively, on October 11, 2016.

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OPEC 

Traders are skeptical about how much OPEC will be able to reduce production in the next six months. Major oil producers like Russia and OPEC are producing at their peak levels, which suggests that the global glut in the crude oil market could continue until next year. For more on supply and demand, read part three of this series. For more on OPEC production, read part four and part five of this series.

Oversupply will pressure crude oil prices. Lower crude oil prices could have a negative impact on the earnings of oil and gas producers like Carrizo Oil & Gas (CRZO), Cobalt International Energy (CIE), and PDC Energy (PDCE).

Volatility in crude oil prices impacts ETFs and ETNs such as the iShares U.S. Oil Equipment & Services ETF (IEZ), the Energy Select Sector SPDR (XLE), the United States 12 Month Oil ETF (USL), and the PowerShares DWA Energy Momentum (PXI).

On October 11, 2016, Saudi Arabia and Russia’s energy minister stated that they might meet in Riyadh to further discuss caps and production cuts after the Istanbul meeting. For more on the oil producers’ meetings in Istanbul and Algeria, read Crude Oil Prices and Oil Producers’ Meeting in Istanbul and Decoding the Major Oil Producers’ Meeting in Algeria.

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Markets focus on the US crude oil inventory report  

The American Petroleum Institute will release its weekly crude oil (UWTI) (SCO) (ERY) inventory report on October 12, 2016. For more on the inventory reports, read part two of this series. For more on the weekly energy calendar, read Important Events on the Energy Calendar: October 10–14. 

What’s in this series?  

On October 11, 2016, US crude oil prices were 1.1% below their 2016 high. Read part four and part five of this series to learn about bearish crude oil drivers. On the other hand, WTI crude oil prices have risen 95% since their lows in February 2016. Read the last two parts of this series for updates on bullish crude oil drivers. For more on US crude oil prices’ highs and lows, read WTI Crude Oil Prices Hit a 15-Month High.

In the next part, we’ll discuss crude oil prices during early morning trading on October 12.

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