Renewed Optimism for Major Oil Producers’ Production Cut

Crude oil prices  

WTI (West Texas Intermediate) crude oil (XLE) (XOP) (USL) futures contracts for May delivery rose 1.6% and settled at $51.03 per barrel on April 4, 2017. The S&P 500 (SPY) (SPX-INDEX) also rose 0.1% on April 4, 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 31, 2017.

Crude oil prices are at a one-month high due to the following:

Renewed Optimism for Major Oil Producers’ Production Cut

Major oil producers’ deal  

Crude oil (IEZ) (BNO) (SCO) prices hit a 20-month high on February 23, 2017, due to major producers’ production cut deal. Crude oil prices are also up 23% year-over-year due to the deal.

The deal’s possible extension beyond June 2017 supported oil prices on April 4, 2017. Six OPEC members and Oman expressed interest in extending major producers’ production cut deal in 2H17. On April 2, 2017, OPEC’s secretary general said that global crude oil inventories are falling. It shows that the deal is helping the oil market rebalance.

Moves in crude oil prices impact oil and gas exploration and production companies’ earnings such as PDC Energy (PDCE), Cobalt International Energy (CIE), ExxonMobil (XOM), and Continental Resources (CLR).

Post-settlement trade  

The API’s (American Petroleum Institute) bullish crude oil inventory supported US crude oil prices. Prices rose in post-settlement trade on April 4, 2017.

Market focuses on US crude oil inventories 

The U.S. Energy Information Administration will release its weekly crude oil inventory report on April 5, 2017, at 10:30 AM EST. We’ll look at the API’s estimates for US crude oil and gasoline inventories in Part 3 and Part 4 of this series.

In this series, we’ll also discuss US gasoline demand and some crude oil price forecasts. Let’s start with US crude oil prices in early morning trade on April 5, 2017.