Why Oil Is Losing Its Shine

US crude oil moved higher this week

On March 7, US crude oil April futures rose 0.8% and settled at $56.66 per barrel. Although US crude oil moved higher this week, US crude oil fell 1% in the trailing week due to weakness.

Why Oil Is Losing Its Shine

Oil is losing its shine

At 6:26 AM EST on March 8, US crude oil futures have fallen by ~$1. Mario Draghi, the European Central Bank president, expressed his concerns about the weaker European economy. In February, China’s exports fell 21% year-over-year, while imports fell 5.2%. The decline in the exports was the highest in the last three years.

On March 8, these factors might pull US crude oil prices during trading. However, oil bears should stay cautious about a possible bear trap. The oil rig count is at the lowest level since May. Based on the EIA’s Monthly Crude Oil Production Report released on February 28, the crude oil production in the United States fell 0.5% in December on a month-over-month basis—the first time since May. We might see a decline in the US crude oil weekly production figure in the coming weeks. Last week, the US crude oil production figure was at a record level of 12.1 MMbpd (million barrels per day). US crude oil exports fell for the second consecutive week to 2.8 MMbpd last week—an important factor for the shrinking global oil supply.

The fall in equity indexes like the S&P 500 (SPY) might be another important factor for oil’s fall, which we’ll discuss in Part 3. Lower oil prices could be a negative development for upstream stocks like ConocoPhillips (COP), Chesapeake Energy (CHK), and Denbury Resources (DNR). In Part 4, we’ll discuss the important price levels for US crude oil next week.