US crude oil futures
July WTI (West Texas Intermediate) crude oil (USO) (XOP) (XLE) (RYE) futures contracts fell 0.2% and settled at $51.36 per barrel on May 24, 2017. Brent crude oil futures contracts fell 0.4% and closed at $53.96 per barrel on the same day. Prices fell due to profit-booking after testing a one-month high on May 23, 2017. The S&P 500 (SPY) (SPX-INDEX) rose 0.5% to 2,404 on May 24, 2017. It’s the highest level ever. The S&P 500 also rose for the fifth consecutive day.
- OPEC and non-OPEC producers could officially declare a crude oil production cut by 1.8 million barrels per day for six, nine, or 12 months starting in July 2017.
- Saudi Arabia, Russia, Iraq, Kuwait, and Venezuela favored a nine-month extension of the production cut deal.
- Libya and Nigeria might be exempt from the production cut deal.
- Iran might support the deal after achieving its production target in 2017.
The production cut deal could help remove surplus global crude oil supplies. Global crude oil inventories are above their five-year average or above 3 billion barrels. It would help narrow the gap between supply and demand.
Impact on crude oil prices
US crude oil futures rose more than 9% after OPEC’s previous meeting in November 2016. On May 24, 2017, prices are near a one-month high due to the possible extension of the production cut deal. The fall in US crude oil inventories for the seventh straight week and near-record US refinery crude oil demand also supported oil prices.
Crude oil prices have already factored in the production cut deal. So, prices could rise after the deal’s official confirmation. However, prices could skyrocket if the deal is extended for 12 months. Higher crude oil prices have a positive impact on oil and gas producers’ earnings like Hess (HES), Chevron (CVX), Denbury Resources (DNR), and Triangle Petroleum (TPLM).
In this series
In this series, we’ll look at the US dollar, US crude oil production, and inventories. We’ll also look at gasoline inventories.
We’ll start by looking at US crude oil prices in early morning trade on May 25, 2017.