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Why Did Crude Oil Prices Hit a 3-Month Low?

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Crude oil prices  

April WTI (West Texas Intermediate) crude oil (XLE) (XOP) (UCO) futures contracts fell 5.4% and settled at $50.28 per barrel on March 8, 2017. Broader markets (SPY) (SPX-INDEX) also fell 0.3% to 236.6 on March 8, 2017. Oil and gas are major parts of the energy sector. The energy sector contributed to ~6.6% of the S&P 500 as of March 3, 2017.

US crude oil prices hit a three-month low due to the following factors:

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  • massive rise in US crude oil inventories to record levels
  • rise in Cushing crude oil inventories by 0.9 MMbbls (million barrels) between February 24, 2017, and March 3, 2017
  • rise in US crude oil production to a 13-month high
  • US dollar (UUP) near a 14-year high
  • US shale oil production will increase by 80,000 bpd (barrels per day) in March 2017—largest increase in five months
  • Russia’s lower compliance despite major oil producers’ production cut deal
  • rise in US crude oil rigs
  • rise in Iran’s crude oil production and exports
  • fall in hedge funds’ net-long positions on WTI crude oil contracts from record levels

US crude oil inventories 

Crude oil (USO) (IXC) (XES) was trading near a 20-month high on March 7, 2017. The EIA (U.S. Energy Information Administration) released its weekly crude oil inventory report on March 8, 2017. The bearish inventory report led to a massive sell-off in US crude oil futures on March 8, 2017. The factors mentioned above also contributed the bearish momentum. US crude oil prices posted their biggest one-day decline in the last 13 months. In this series, we’ll discuss the key bearish catalyst for crude oil prices in 2017.

The Crude Oil Volatility Index rose ~20% to 31.7 on March 8, 2017. It hit 24.7 on March 1, 2017—the lowest level since October 2014. Moves in crude oil prices can impact oil and gas producers’ earnings like Hess (HES), Chevron (CVX), Denbury Resources (DNR), and Goodrich Petroleum (GDP).

In this series 

In this series, we’ll look at US crude oil production, refinery demand, imports, and inventories. We’ll also look at gasoline and distillate inventories.

We’ll start by looking at US crude oil prices in early morning trade on March 9, 2017.

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