Crude oil prices

April WTI (West Texas Intermediate) crude oil (XLE) (USO) (XOP) futures contracts rose 0.1% and closed at $53.7 per barrel on February 17, 2017.

Likewise, the S&P 500 (SPY) (SPX-INDEX) and the Dow Jones Industrial Average rose 0.1% and 0.02%, respectively, on the day. Bullish momentum in the US stock market partially supported oil prices.

Will OPEC Extend Its Crude Oil Production Cut Plan?

Crude oil prices are trading near an 18-month high for the following reasons:

  • The IEA (International Energy Agency) reported ~90% compliance within OPEC (Organization of the Petroleum Exporting Countries) members due to major producers’ production cut deal. The deal led to a fall in OPEC’s production in January 2017 to 29.9 MMbpd (million barrels of oil per day). In this way, it’s helped to support oil prices and rebalance the crude oil market.
  • Hedge funds’ net long positions on WTI crude oil contracts are at an all-time high.
  • Russia’s oil production fell 60,000 bpd (barrels per day) to 11.0 MMbpd in January 2017, compared to the previous month.

Possible extension of major oil producers’ production cut deal

Reuters estimates that OPEC could extend the major producers’ production cut deal due to record US crude oil and gasoline inventories and record OECD crude oil inventories.

However, a key risk of extending the deal is that US shale oil producers will benefit from high prices. As a result, we could see a much faster rise in US crude oil production along with a rise in US crude oil rigs.

Volatility in crude oil prices affects the earnings of oil and gas exploration and production companies such as Chevron (CVX), Northern Oil & Gas (NOG), ExxonMobil (XOM), Comstock Resources (CRK), and Triangle Petroleum (TPLM).

What’s in this series?  

In this series, we’ll look at the energy calendar, US crude oil’s (USL) (PXI) highs and lows in the last 12 months, Cushing crude oil inventories, the US crude oil rig count, and some crude oil price forecasts.

Let’s look at the US dollar and its impact on crude oil prices in the next part of this series.

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