Crude oil prices
December US crude oil (USO) (UCO) (DTO) futures contracts fell 0.07% to $56.77 per barrel in electronic exchange at 12:55 AM EST on November 9, 2017. Prices fell due to the surprise build in US crude oil inventories and profit booking. US crude oil prices are near a 30-month high. Higher oil prices benefit oil and gas producers (VDE) (XOP) like Gulfport Energy (GPOR), Devon Energy (DVN), and Occidental Petroleum (OXY).
E-Mini S&P 500 (SPY) futures contracts for December delivery fell 0.14% to 2,587.75 during the same period. Similarly, December 2017 E-Mini NASDAQ (QQQ) futures contracts fell 0.12% to 6,333.75 during the same time.
OPEC and Russia decided to cut oil output by 2%, or 1,800,000 bpd, from January 2017 to March 2018. Russia decided to cut oil production by 2% or 1,800,000 bpd from January 2017 to March 2018. These production cuts tightened global supplies, reduced global and US crude oil inventories, and supported oil prices. Brent crude oil (BNO) (USL) prices are up almost 40% since the lows in June 2017 partially due to current productions cuts.
OPEC’s meeting is scheduled for November 30, 2017. Saudi Arabia, Russia, Iraq, Kuwait, and Nigeria signaled prolonging the production cuts nine more months. On November 7, 2017, OPEC’s secretary general said that OPEC is looking for a consensus on how long to extend the production cut pact.
Traders believe that production cuts may be extended for nine or 12 months. Any extension could support oil prices. However, Citigroup’s Morse thinks that OPEC might extend the deal for three more months or postpone the decision making until January 2017. If there is no extension of the production cut pact, prices could collapse. After the expiry of the pact, Russia, Libya, Iraq, and Iran could ramp up production and pressure oil prices.
Next, we’ll cover how US crude oil inventories influence oil prices.