10 Aug

Crude Oil Futures Rose Due to Record Refinery Demand

WRITTEN BY Gordon Kristopher

US crude oil futures  

September US crude oil (IEZ) (XES) (USL) futures contracts rose 0.8% and closed at $49.56 per barrel on August 9, 2017. Brent crude oil futures contracts rose 1.1% to $52.70 per barrel on the same day.

Crude oil futures rose for the first time in three days. Prices rose due to the following:

  • US crude oil refinery demand hit 17.57 MMbpd (million barrels per day) for the week ending August 4, 2017. It’s the highest level since 1982.
  • US crude oil inventories fell by 6.5 MMbbls (million barrels) compared to market estimates of 2.7 MMbbls for the week ending August 4, 2017.
  • A fall in US crude oil imports and a rise in refinery capacity utilization last week also supported crude oil prices.
  • Saudi Arabia will likely cut crude oil exports to worldwide customers by at least 520,000 bpd (barrels per day) in September 2017 due to OPEC’s deal.
  • Bullish momentum in the S&P 500 Index (SPY) (SPX-INDEX) could support oil and gas prices.
  • The US dollar (UUP) is near a 13-month low.

Crude Oil Futures Rose Due to Record Refinery Demand

US crude oil (USO) (UCO) prices are near a two-month high. They have risen ~16% from their ten-month low on June 21, 2017. Higher crude oil prices benefit crude oil ETFs and oil and gas producers. However, they have fallen 13% year-to-date due to the bearish drivers mentioned below:

Crude oil (XLE) (XOP) prices might not sustain the rally due to the following reasons:

  • A fall in crude oil and gasoline demand is expected after the summer ends.
  • Crude oil production could rise in Canada, Brazil, and the US.
  • Libya’s crude oil production is expected to hit 1.25 MMbpd by the end of 2017.
  • Global crude oil inventories are rising on a seasonally-adjusted basis.
  • Vehicles are becoming more fuel efficient.

September crude oil futures are trading above their 20-day, 50-day, and 100-day moving averages. However, they’re below their 200-day moving averages. It suggests that crude oil (SCO) (BNO) prices could trade around $50 per barrel in the near term.

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

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