14 Aug

Why Global Demand and Nigeria Are Driving Crude Oil Futures

WRITTEN BY Gordon Kristopher

US crude oil futures 

WTI (West Texas Intermediate) crude oil (XLE)(XOP)(USO) futures contracts for September delivery rose 0.5% to $48.82 per barrel on August 11, 2017. Brent crude oil futures also rose 0.4% to $52.1 per barrel on the same day.

Crude oil futures rose due to the following factors.

  • International Energy Agency (or IEA) expects a strong global crude oil demand growth rate for 2017.
  • There was a massive fall in US crude oil inventories between July 28 and August 4.
  • 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.
  • Experts expect supply disruptions in Nigeria and Libya.
  • The US dollar (UUP) is near a 13-month low.

Why Global Demand and Nigeria Are Driving Crude Oil Futures

However, Brent and US crude oil prices were down 0.6% and 1.5%, respectively, last week. US crude oil prices are also down 14.4% year-to-date due to bearish drivers. Lower crude oil prices have a negative impact on oil and gas producers like Carrizo Oil & Gas (CRZO), PDC Energy (PDCE), and Continental Resources (CLR).

Broader market

The S&P 500 (SPY)(SPX-INDEX) rose 0.1% to 2441.32 on August 11, 2017. Likewise, the Dow Jones and NASDAQ rose on the same day. Bullish momentum in the broader market could support oil and gas demand and prices.

Nigeria 

Nigerian crude oil production was at 1.66 MMbpd in July 2017. It’s at its highest in the last 17 months. On August 11, 2017, Shell’s (RDS.A) oil production facility in the Niger Delta was stormed by hundreds of people for jobs and infrastructure development, which could hamper production activity.

OPEC deal

Higher compliance for the OPEC’s output cut deal and expectations of supply disruptions in Libya and Nigeria could support crude oil prices. The rise in crude oil (RYE)(VDE)(UCO) prices could benefit energy investors in equity ETFs and energy stocks.

What’s in this series?  

In this series, we’ll look at global oil supply and demand, the US dollar, crude oil highs and lows in the last 18 months, Cushing crude oil inventories, and the US crude oil rig count.

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