Crude oil prices
December West Texas Intermediate crude oil futures contracts fell 0.4% and were trading at $45.1 per barrel in electronic trading at 4:45 AM EST on November 10, 2016. A strong dollar could pressure crude oil prices. For more on crude oil prices, read Part 1 of this series. Read How Are the US Dollar and OPEC Capping Crude Oil Prices? for more on the US dollar.
Crude oil supply and demand balance
OPEC (Organization of Petroleum Exporting Countries) released its Annual Report on November 8, 2016. It reported that crude oil demand will rise in 2017 to 95.3 MMbpd (million barrels per day). Crude oil demand will rise between 2017 and 2020. The rise in demand could narrow the crude oil demand and supply gap. OPEC will release its Monthly Oil Market Report on November 11, 2016—for information about the last report, read OPEC’s Monthly Oil Market Report Is Negative for Oil Prices.
The EIA (U.S. Energy Information Administration) released its Short-Term Energy Outlook report on November 8, 2016. It reported that crude oil supply could outstrip demand by 730,000 bpd (barrels per day) in 1Q17. It expects that crude oil supply and demand will reach a balance in 3Q17. However, crude oil supply could outstrip demand by 410,000 bpd again in 4Q17.
The possibility of increasing crude oil supplies from Iraq, Iran, Nigeria, and Libya could add to the oversupplied crude oil market. Read Iran, Nigeria, and Libya Could Undo OPEC’s Historic Deal, Analyzing Russia’s Crude Oil Production, OPEC’s Crude Oil Production Rises despite OPEC’s Historic Deal, and Iran’s Crude Oil Production Could Impact the Crude Oil Market for more on the oversupply situation in the oil market.
The IEA (International Energy Agency) will release its monthly Oil Market Report on November 10, 2016—for information about the last report, read IEA’s Monthly Oil Market Report Is Bearish for Crude Oil Prices.
Changes in crude oil demand and supply
Changes in crude oil demand and supply estimates can cause volatility in crude oil prices. Volatility in crude oil prices can impact oil producers’ profitability like Denbury Resources (DNR), Warren Resources (WRES), Synergy Resources (SYRG), SM Energy (SM), and Goodrich Petroleum (GDP).
Volatility in crude oil prices impacts funds such as the VelocityShares 3x Inverse Crude Oil ETN (DWTI), the Direxion Daily Energy Bull 3x Shares ETF (ERX), the Guggenheim S&P 500 Equal Weight Energy ETF (RYE), the ProShares Ultra Bloomberg Crude Oil ETF (UCO), the PowerShares DWA Energy Momentum ETF (PXI), the SPDR S&P Oil & Gas Equipment & Services ETF (XES), the United States Oil ETF (USO), the Direxion Daily Energy Bear 3x (ERY), and the ProShares UltraShort Bloomberg Crude Oil ETF (SCO).
In the next part of this series, we’ll look at US crude oil inventories.