US and Brent crude oil futures
January US crude oil (USO) (SCO) futures fell 1.2% to $57.3 per barrel on November 29, 2017. Brent oil futures also fell 0.8% to $63.11 per barrel. Prices (BNO) (DBO) fell for the third day. They fell due to the rising differences between OPEC and Russia about extending ongoing production cuts beyond March 2018. The increase in US crude oil production also weighed on oil (UWT) (DWT) prices. The EIA released the data yesterday. The rise in gasoline and distillate inventories also pressured oil (UCO) prices. The bearish momentum could pressure oil (USL) prices lower.
Crude oil’s performance and OPEC’s meeting
US and Brent oil (BNO) futures fell 2.8% and 1.8% from their 30-month hit in November 2017. Saudi Arabia is pushing to extend the production cuts until December 2018. Higher oil prices benefit oil producers (XLE) (VDE) and will also be crucial in helping transform Saudi Arabia’s economy. However, Russia is worried that higher oil prices could spur US shale oil production. So, it wants the production cuts to be extended for a shorter period.
Brent and US oil prices have risen ~30% since June 2017. The prices rose due to current production cuts, a decline in global oil inventories, a drop in Venezuela’s oil production, and tensions in the Middle East. Higher oil prices benefit oil producers (RYE) (XOP) like Chesapeake Energy (CHK), Hess (HES), and Cobalt International Energy (CIE).
The Dow Jones Industrial Average Index (DIA) rose 0.4% to 23,940.68 on November 29, 2017—the highest settlement ever. NASDAQ (QQQ) fell 1.3% to 6,824.34 on November 29, 2017. The S&P 500 (SPY) fell 0.04% to 2,626.07 on the same day. The IT (XLK) (VGT) and real estate (VNQ) (IYR) sectors fell 2.6% and 0.2% on November 29, 2017, which dragged SPY yesterday.
In this series
This series focuses on US crude oil, gasoline, distillate inventories, and production.
Next, we’ll discuss how OPEC’s meeting could impact oil prices.