US crude oil
US crude oil (USO) (OIIL) (USL) (DBO) futures contracts for April delivery closed at $47.72 per barrel on March 14, 2017—1.4% lower than the previous day’s closing price. Prices fell due to concerns about rising US oil production and doubts over the OPEC (Organization of the Petroleum Exporting Countries) supply cut deal.
Saudi Arabia reported that its oil production in February 2017 rose ~0.26 million barrels per day, crossing the mark of 10 million barrels per day. According to an OPEC report, OECD (Organisation for Economic Co-operation and Development) commercial oil stockpiles reached 3,006 million barrels—278 million barrels above the five-year average.
Rising global oil inventories
The increase in global oil inventories and rising Saudi production even as US oil production is on the rise could pressure oil prices further. In February 2016, US oil prices fell below the $30 level due to rising oil inventories and production. (In Part 2 of this series, we’ll discuss how oil rigs impact US oil production.)
In the trailing week, US crude oil active futures fell 10.2%. During the same period, the Energy Select Sector SPDR ETF (XLE) fell 3.2%, while the S&P 500 Index (SPY) (QQQ) (SPX-INDEX) was flat. The Dow Jones Industrial Average (DIA) (DJIA-INDEX) fell 0.3% during this period. Remember, crude oil is an important driver for energy ETFs, and it can also impact broader markets.
On March 14, 2017, the API (American Petroleum Institute) reported a fall of ~0.53 MMbbls (million barrels) in crude oil inventories for the week ending March 10, 2017. The EIA (US Energy Information Administration) will provide inventory data for the week ending March 10, 2017, on March 15, 2017.
On March 15, 2017, at 2:50 AM EST, US crude oil (OIIL) April futures were trading at $48.51 per barrel, a 1.6% rise over their closing price on March 14, 2017, given the bullish API crude oil inventories report.
Key moving averages
Crude oil futures are now trading 8.9% below the 100-day moving average and 9.1% below the 20-day moving average. Prices below the 20-day moving average and 100-day moving average indicate bearish sentiment for crude oil prices.
Energy ETFs and series focus
It’s important to remember that crude-related sentiments impact ETFs like the United States Brent Oil ETF (BNO), the PowerShares DWA Energy Momentum ETF (PXI), the Vanguard Energy ETF (VDE), and the ProShares UltraShort Bloomberg Crude Oil (SCO).
In this series, we’ll analyze how fundamental drivers like the rig count, crude oil inventories, and the US dollar impact crude oil prices. We’ll also try to understand what the crude oil futures forward curve and the Brent-WTI spread might be indicating.
Next, we’ll see how rig counts impact oil prices.