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Crude Oil Futures Are near a 2-Month High


Nov. 20 2020, Updated 3:20 p.m. ET

US crude oil futures 

WTI (West Texas Intermediate) crude oil futures contracts for September delivery rose 1.8% to $48.75 per barrel on July 26, 2017. Brent crude oil futures contracts rose 1.2% and closed at $50.82 per barrel on the same day.

ETFs like the United States Oil ETF (USO) and the ProShares Ultra Bloomberg Crude Oil ETF (UCO) follow crude oil futures contracts. These ETFs rose 1.5% and 3.4%, respectively, on July 26, 2017.

WTI and Brent crude oil prices are at the highest level since May 30, 2017. Prices rose due to the following:

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  • There was a massive fall in US crude oil inventories by 7.2 MMbbls (million barrels) on July 14–21, 2017.
  • Last week, there was a larger-than-expected fall in gasoline and distillate inventories.
  • Hess (HES) posted a larger-than-expected earnings loss in 2Q17. Depressed oil prices in 2Q17 and lower production led to the loss. The company has cut its capital budget 4% for 2017. Anadarko Petroleum (APC) also announced cost cutting for 2017.
  • Nigeria’s crude oil production fell this week due to a leak in the pipeline. It could hamper production by 180,000 bpd (barrels per day)–225,000 bpd. The pipeline is owned by Shell (RDS.A) for exporting crude oil.
  • Political instability and elections in Venezuela could hamper crude oil production activity in the country during the short term. The elections will be held on July 30, 2017. Venezuela produces 2 MMbpd (million barrels per day) of crude oil.
  • The S&P 500 Index (SPY) (SPX-INDEX) rose to 2,477.83—the highest level ever.
  • OPEC’s production cut deal could help rebalance the oil market.
  • The US dollar (UUP) is near a 13-month low.

US crude oil prices have risen 8% in the past month. Read Crude Oil Futures Near 7-Week High for more on bullish drivers.

The rollercoaster ride in crude oil (IXC) (IYE) prices impacts oil and gas exploration and production companies like Apache (APA), Chesapeake Energy (CHK), and Continental Resources (CLR). However, US crude oil prices have fallen ~15% so far in 2017. Prices fell due to the following factors:

  • Crude oil production rose in the US, Libya, Nigeria, and Iran.
  • US crude oil rigs have risen more than 142% from lows in May 2016.
  • OPEC and Saudi Arabia’s crude oil production rose in June 2017.
  • There was a rise in US crude oil exports.

Prices might maintain the rally due to the following reasons:

  • Libya’s crude oil production is expected to hit 1.25 MMbpd by 2017 and 1.5 MMbpd by 2018.
  • Production is expected to rise in Kazakhstan, Canada, and Brazil in 2017 and 2018, respectively.
  • Global crude oil inventories are rising on a seasonally-adjusted basis.
  • Vehicles are becoming more fuel efficient.

Crude oil fundamentals suggest that crude oil (IEZ) (XES) prices could be range bound in the short term.

In this series, we’ll look at crude oil drivers.


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