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Will OPEC’s Meeting Impact Crude Oil Futures?

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Crude oil futures 

September West Texas Intermediate crude oil (XOP) (UCO) (VDE) futures contracts fell 0.4% and closed at $49.39 per barrel on August 7, 2017. Brent crude oil futures contracts fell 0.1% to $52.37 per barrel on the same day.

Prices fell due to the following:

  • There was a restart of crude oil production at Libya’s important Sharara field to normal levels.
  • OPEC’s crude oil production hit a 2017 high in July 2017.
  • OPEC’s crude oil exports rose by 370,000 bpd (barrels per day) to 26.11 MMbpd (million barrels per day) in July 2017.

So far, crude oil (XLE) (USO) prices have fallen 13.7% in 2017 due to bearish drivers. Lower crude oil prices have a negative impact on oil and gas producers such as Bill Barrett (BBG), Chevron (CVX), Hess (HES), and Bonanza Creek Energy (BCEI).

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OPEC and non-OPEC meeting 

OPEC and non-OPEC producers’ technical committee meeting is being held in Abu Dhabi on August 7–8, 2017. The meeting’s agenda is increasing compliance towards the production cut deal.

The meeting has been very slow providing assurance to the market that there would be high compliance with the production cut deal. It also pressured crude oil (IEZ) (XES) (SCO) (BNO) prices on August 7, 2017. However, OPEC has high compliance towards the output cut deal—compared to its historical standards.

S&P 500 and energy sector diverged so far in 2017 

The S&P 500 (SPY) (SPX-INDEX) has risen 10.8% YTD (year-to-date). The S&P 500 energy sector has fallen 13.6 YTD. The energy sector has been dragging the S&P 500 in 2017. Energy sector stocks have lagged the other sector stocks in 2017. Stocks like Denbury Resources (DNR) and Sanchez Energy (SN) have fallen ~64% and ~50%, respectively, YTD. 

In the next part, we’ll look at how Libya’s crude oil production drives oil prices.

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