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Crude Oil Prices Rise: Is It Time for a Collapse?

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US crude oil prices

WTI (West Texas Intermediate) crude oil (XLE) (USO) (RYE) futures contracts for August delivery rose 0.8% and settled at $45.53 per barrel on July 6, 2017. Brent crude oil futures also rose 0.6% and closed at $48.11 per barrel on July 6, 2017.

Prices rose due to the following:

  • a larger-than-expected fall in US crude oil inventories on June 23–30, 2017
  • a larger-than-expected fall in US gasoline inventories last week
  • an unexpected fall in US distillate inventories on June 23–30, 2017
  • short covering

WTI crude oil prices have risen 9.4% since June 21, 2017. Brent and US crude oil prices are near a three-week high due to the following:

For more on bullish drivers, read Crude Oil Futures Rose for the Seventh Straight Day.

Higher crude oil prices have a positive impact on oil and gas producers’ earnings like ExxonMobil (XOM), Hess (HES), and Bonanza Creek Energy (BCEI).

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However, Brent and WTI crude oil prices fell ~4% on July 5, 2017, due to the rise in OPEC’s crude oil production and exports in June 2017. Brent and WTI crude oil prices have fallen ~20% year-to-date. Prices entered into the bear market on June 21, 2017. Prices might not sustain the recent rally due to the following:

  • a rise in weekly US crude oil production on June 23-30, 2017
  • Russia might not support deeper or longer production cuts
  • expectation of slowing crude oil imports and demand from China, India, and Japan in the coming months
  • a rise in Libya, Nigeria, and Iran’s crude oil production
  • high crude oil storage in tankers
  • a rise in US crude oil exports
  • rising concerns about whether the production cut deal will remove excess crude oil from the market

Key moving averages and long-term fundamentals are still bearish for crude oil prices, which suggests that prices could trade lower.

In this series, we’ll discuss crude oil drivers in more detail.

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