US Inventories and Libya Impact Crude Oil Prices



Crude oil prices  

February 2017 WTI (West Texas Intermediate) crude oil (PXI) (USL) (IXC) (ERY) (IYE) futures contracts fell 1.5% and settled at $52.5 per barrel on December 21, 2016. It’s the highest settlement in 17 months. Brent crude oil futures also fell 1.6% and closed at $54.5 per barrel.

Crude oil prices fell due to the unexpected rise in US crude oil inventories. However, crude oil prices are trading near 2016 highs due to major oil producers’ production cut, which would curb oversupply in the market. OPEC (Organization of the Petroleum Exporting Countries) and non-OPEC producers agreed to cut crude oil production by 1.8 MMbpd (million barrels per day) from January 2017 onwards.

ETFs like the United States Oil ETF (USO) and the ProShares Ultra Bloomberg Crude Oil ETF (UCO) follow crude oil futures contracts. These ETFs fell 1.6% and 2.8%, respectively, on December 21, 2016.

Libya’s crude oil production 

On December 20, 2016, Libya’s National Oil Corporation reported that pipelines leading from the Sharara and El Feel fields were reopened. The pipelines were closed for two years due to militant attacks. The pipelines are expected to add 270,000 barrels per day of crude oil supply over the next three months. The expectation of a rise in production from Libya also pressured crude oil prices.

Resuming operations at the Es Sider port in Libya could also limit the upside for crude oil prices. For more, read Libya’s Crude Oil Production Could Impact Crude Oil Prices.

US crude oil inventories  

The EIA (U.S. Energy Information Administration) released its weekly crude oil inventory report on December 21, 2016. It reported that US crude oil inventories rose by 2.3 MMbbls from December 9–16, 2016. We’ll look at US crude oil inventories and their regional breakdown in Part 2 of this series.

Earlier, the API (American Petroleum Institute) estimated that US crude oil inventories fell by 4.2 MMbbls from December 9–16, 2016. The API added that Cushing crude oil inventories rose by 0.7 MMbbls. Read Cushing Crude Oil Inventories Could Pressure Crude Oil to learn more.

Moves in crude oil prices can impact oil and gas producers’ earnings like ExxonMobil (XOM), Chevron (CVX), Northern Oil & Gas (NOG), Warren Resources (WRES), and QEP Resources (QEP)

The rollercoaster ride in crude oil and natural gas prices also impacts funds such as the Fidelity MSCI Energy ETF (FENY), the Guggenheim S&P 500 Equal Weight Energy ETF (RYE), the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), and the United States Brent Oil ETF (BNO).

Series focus  

In this series, we’ll look at US crude oil production, refinery demand, imports, and inventories. We’ll start by looking at US crude oil prices in early morning trade on December 22, 2016.

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