US crude oil inventories
According to the EIA’s (Energy Information Administration) report on March 29, 2017, US crude oil inventories rose 0.87 MMbbls (million barrels) in the week ended March 24, 2017, as compared to the expected rise of 1.4 MMbbls and a rise of 5.0 MMbbls in the previous week.
On March 29, 2017, the United States Oil Fund (USO) rose 2.1%, and the ProShares Ultra Bloomberg Crude Oil ETF (UCO) rose 4.2% after the announcement of the latest crude oil (USL) (BNO) (DBO) inventories report. Crude oil prices generally react positively to any fall in inventory levels.
The rise in inventories indicates that the supply glut position in the market is increasing, which adds more uncertainty to the movement of crude oil prices. The less-than-expected increase in crude oil inventories supported the movement in these ETFs.
Movement of crude oil prices
In the second week of March 2017, we saw that crude oil prices showed a continuous fall. Between March 7 and March 14, 2017, crude oil prices fell nearly 11.5%. Rising global crude oil inventories and rising crude oil production in the US pressured crude oil prices (SCO) (OIIL) (DBO). A fall in crude oil prices hurt the energy sector (XLE) as a whole.
However, in the last week of March 2017, the energy sector recovered some of its initial losses. The energy sector ETF (XLE) rose 1.9% between March 23 and March 30, 2017. US crude oil May futures also rose nearly 5.6% during this period. The performance of the XLE mainly depends on the movement of crude oil and stock performances.
In the next part of this series, we’ll see which indicators investors should look at this week.