Crude oil prices
June WTI (West Texas Intermediate) crude oil (IEZ) (BNO) (UCO) futures contracts fell 0.8% and closed at $49.23 per barrel on April 24, 2017. Crude oil and natural gas are major parts of the energy sector. The energy sector contributed to ~6.6% of the S&P 500 (SPY) (SPX-INDEX) as of April 21, 2017. The S&P 500 and Dow Jones (DJIA-INDEX) rose 1.1%, respectively, on April 24, 2017.
US crude oil prices hit a four-week low due to the following:
- expectation of a rise in Russia’s crude oil production in 2H17
- a rise in US crude oil production
- a rise in the US crude oil rig count to a 24-month high
Russia’s crude oil production
On April 24, 2017, Russia said that after the expiry of major oil producers’ production cut deal in June 2017, it would ramp up production. The production rate could hit a 30-year high. Russia usually increases production in the second half the year. So far, Russia’s commitment to the deal has supported oil prices.
Reuters data showed that Russia’s oil shipment hit a record 5 MMbpd (million barrels per day) in April 2017, which is 17% higher than December 2016 levels. Russia’s energy ministry estimates that Russia’s crude oil production will average 11.02 MMbpd in 2H17—75,000 bpd (barrels per day) higher than its target under the deal. Any rise in production from Russia could pressure crude oil prices. Traders are concerned about whether the production cut deal would remove surplus oil from the market.
On April 20, 2017, Saudi Arabia’s energy minister said that some OPEC members expressed interest in cutting more production in the coming months. OPEC leaders commented about the possibility of extending major producers’ production cut deal in 2H17. Moves in crude oil prices impact oil producers such as Chevron (CVX), Warren Resources (WRES), and QEP Resources (QEP).
What’s in this series?
In this series, we’ll focus on the American Petroleum Institute’s crude oil inventories, OPEC’s spare crude oil production capacity, OECD crude oil inventories, and the global crude oil supply outage.
In the next part of this series, let’s start with crude oil prices during early morning trade on April 25, 2017.