Gordon Kristopher

Mild weather and rising inventory estimates could drag natural gas prices lower. The key support for natural gas prices is seen at $2.60 per MMBtu.

The weekly commercial crude oil inventory report was released by the EIA on April 8, 2015. Weekly crude oil inventories rose by 10.95 MMbbls.

Market surveys project that the global crude oil glut could narrow due to supply outages in 2016.

The crude oil production from OPEC and non-OPEC producers is expected to increase by 300,000 bpd–600,000 bpd in OPEC’s upcoming meeting.

The rise in US crude oil production would have contributed to the rise in US crude oil inventories between October 28 and November 4, 2016.

The EIA estimates that Iran’s crude oil production was flat at 3.81 MMbpd in April 2017—compared to March 2017. Production rose 8.8% YoY.

Analysts estimate that Cushing inventories could have declined on March 2–9. The EIA is scheduled to release its crude oil inventories report on March 14.

Natural gas production from the lower 48 states of the US increased slightly by 0.6% to 79.82 Bcf as of May 20, 2015—compared to the previous week.

The US Dollar Index (DXY) has risen 8% against global currencies in 2015. The rising dollar should put further pressure on the pessimistic oil market.

The US crude oil rig count fell by ten to 362 rigs for the week ending April 1, 2016, which is the lowest level since the 1940s.

Lower crude oil prices impact US and international oil producers’ profitability such as PetroChina (PTR), Sanchez Energy (SN), and Stone Energy (SGY).

In its March report, the EIA stated that the US natural gas supply-demand gap could average 2.89 Bcf per day in 2016 and rise to 4.05 Bcf per day in 2017.

December natural gas (UNG) (BOIL) futures contracts trading on NYMEX fell 0.97% to $3.05 per MMBtu (or million British thermal units) on October 26, 2017.

Baker Hughes reported that US crude oil rigs were flat at 863 on July 6–13. The rigs have risen by 98 or ~12.8% year-over-year.

The EIA released its weekly crude oil inventory report on September 28, 2016. US crude oil inventories are near January 2016 levels.

The S&P 500 was trading at 2,068.59 on February 10, 2015, the highest level since December 30, 2014.

The API released its weekly inventory report on December 28, 2016. It estimates that US gasoline inventories fell by 2.8 MMbbls from December 16–23, 2016.

The EIA reported that the US commercial crude oil inventory rose by 2.6 MMbbls (million barrels) to 487.4 MMbbls for the week ending December 25, 2015.

US natural gas inventories are 16.4% more than their five-year average. High natural gas inventories could keep a lid on US natural gas prices.

The EIA estimates that US natural gas inventories will be ~4.0 trillion cubic feet by the end of October 2016, which is the start of the 2016–2017 heating season.

On Friday, June 5, Baker Hughes released the weekly natural gas rig count report. As expected, natural gas rigs fell by three to 222 for the week ending June 5.

PointLogic reported that natural gas supplies fell by 1.1% to 79.3 Bcf (billion cubic feet) per day for the week ending June 29, 2016, compared to the previous week.

Leading Nordic bank SEB raised its Brent crude oil forecast to $48 per barrel for 2016 compared to its previous forecast of $44 per barrel.

The unexpected fall in crude oil inventory supported crude oil prices. The fall in US imports might have led to the fall in the US oil inventory.

Bloomberg surveys projected that Cushing crude oil inventories fell by 0.7 MMbbls (million barrels) for the week ending June 3—compared to the previous week.

The key support level for natural gas is seen at $2.50 per MMBtu. Prices hit this mark multiple times in April 2015. Resistance is seen at $2.75 per MMBtu.

An OPEC meeting is scheduled for November 30, 2016, in Vienna. The meeting could provide details about the quota system for OPEC members.

US crude oil (BNO) (USO) (UCO) (IEZ) prices are near an 18-month high as of February 6, 2017. The S&P 500, Dow Jones, and NASDAQ are near all-time highs.

Record US crude oil production, profit-booking, and a larger-than-expected increase in Cushing inventories could pressure oil prices this week.

Rising refinery utilization and declining US output will support crude oil prices. This is positive for crude oil prices.

Figures from the EIA suggest that non-OPEC crude oil production rose by 350,805 bpd to 44.6 MMbpd in September 2016—compared to the previous month.

The EIA (U.S. Energy Information Administration) published that the US crude oil output rose by 48,000 bpd to 9.2 MMbpd for the week ending October 30, 2015.

The SPDR S&P 500 ETF (SPY) fell ~0.5% to $268.8 on April 19, 2018. SPY targets to follow the S&P 500 Index’s performance.

September natural gas futures contracts rose for the third day in a row. Natural gas prices have been trading close to the key resistance of $2.90 per MMBtu.

On October 14, 2016, Baker Hughes (BHI) released its weekly US crude oil rig count. It reported that the US crude oil rig count rose by four to 432 rigs from October 7–14, 2016.

WTI (West Texas Intermediate) crude oil futures contracts for November delivery fell 1.1% and closed at $50.79 per barrel on October 11, 2016.

The EIA (U.S. Energy Information Administration) reported that US retail gasoline prices rose 0.9% week-over-week and settled at $2.24 per gallon for the week ending October 3, 2016.

Brent crude oil prices could trade between $35 and $40 per barrel in 2016 due to a stronger dollar, oversupply, and near-record US crude oil inventories.

Natural gas futures for July delivery slumped by 4.95% on Thursday. Natural gas prices declined due to rising inventory data. It continued its losing streak.

Last week, Baker Hughes reported that the US crude oil rig count fell by one rig to 515 rigs for the week ending January 15, 2016.

Natural gas futures contracts for August delivery rose by 1.5% and settled at $2.69 per MMBtu on July 21. Prices rose due to the hot summer weather forecast.

Cushing crude oil inventories fell by 276,000 barrels from September 16–23, 2016. A decrease in crude oil inventories at Cushing will support crude oil prices.

The API released its weekly crude oil inventories report on July 6. US crude oil inventories fell by 6.7 MMbbls for the week ending July 1, 2016.

NYMEX-traded WTI crude oil futures contracts for September delivery fell by 2.47% and settled at $42.23 per barrel on Thursday, August 13, 2015.

November US crude oil (DBO)(DWT)(SCO) futures contracts rose 3% to $52.22 per barrel on September 25—the highest level since April 2017.

A Platts survey estimated that US crude oil inventories fell by 200,000 barrels from August 5–12. A larger fall in crude oil inventories supported crude oil prices.

In the previous two parts of this series, we covered bullish drivers for crude oil prices. Now let’s look at some key bearish drivers for crude oil prices in 2016.

January WTI crude oil futures fell for the third straight day yesterday. Prices fell below the key psychological levels of $42 per barrel on November 30.

The EIA published its monthly STEO report on January 12, 2016. The global crude oil production will rise to 95.9 MMbpd in 2016 and 96.7 MMbpd in 2017.

The EIA estimates that global crude oil supply outages fell by 38,000 bpd to 2,284,000 bpd in November 2016—compared to the previous month.

Multiyear low crude oil prices impact domestic and international oil producers’ margins like PetroChina, Comstock Resources, Whiting Petroleum, and Denbury Resources.

The EIA estimated that US-marketed natural gas production fell by 0.64 Bcf per day to 77.93 Bcf per day in October—compared to September 2016.

January gasoline futures rose 0.7% to $1.42 per gallon on November 23, 2016. Prices rose despite the larger-than-expected rise in US gasoline inventories.

The EIA estimates that Iran’s crude oil production was flat at 3.8 MMbpd (million barrels per day) in March 2017—compared to February 2017.

Baker Hughes will release the weekly crude oil rig count report on July 24, 2015. The crude oil rig count fell by seven to 638 for the week ending July 17.

The long-term oversupply concerns could drag natural gas prices lower. The key support for natural gas prices is seen at $2.60 per MMBtu.

March WTI (West Texas Intermediate) crude oil (ERX) (IEZ) (USO) (PXI) futures contracts fell 1.6% and settled at $52.17 per barrel on February 7, 2017.

Baker Hughes (BHI) published its weekly US oil and gas count report on October 13. US oil rigs fell by five to 743 from October 6 to 13.

October WTI (or West Texas Intermediate) crude oil (USO) (UCO) futures contracts rose 0.4% and were trading at $47.73 per barrel in electronic trade at 2:00 AM EST on August 22, 2017.

The EIA estimated that four-week average US gasoline demand rose by 134,000 bpd (barrels per day) to 9,102,000 bpd from March 10–17, 2017.

Libya plans to pump 1.25 million barrels per day of crude oil by December 2017. An increase in Libya’s crude oil production could weigh on oil prices.

The energy sector, which accounts for ~6.2% of the S&P 500 Index, fell 0.4% on June 13. XLE fell ~0.4% to $76.42 on June 13.

Lower crude oil prices tend to narrow the supply and demand imbalance.

Baker Hughes, a GE company, published its weekly US crude oil rig report on December 1, 2017.

Crude oil prices rose by ~42% since the lows in February 2016. The major reasons were the slowing US production and the new crude oil production deal.

Crude oil prices rose 12% in August 2016, partially due to speculation around OPEC’s attempts to cap output.

Global crude oil supply outages are near the six-year low. Any fall in the crude oil supply outage could increase the supplies and pressure oil prices.

The EIA estimates that US WTI (West Texas Intermediate) crude oil prices will average $47 per barrel in November 2016 and December 2016.

World Bank expects that US natural gas prices could average $3.1 per MMBtu in 2018, which would be 4% higher than the average level in 2017.

November WTI (West Texas Intermediate) crude oil futures contracts rose 1.4% to $51 per barrel in electronic trade at 5:20 AM EST on October 19, 2016.

US natural gas inventories are 23.2% higher than their five-year average. High inventories could limit the upside potential for US natural gas prices.

The EIA (U.S. Energy Information Administration) reported that US natural gas production averaged 78.9 Bcf per day in July 2016.

Crude oil prices were $50–$54 per barrel between December 2016 and early March 2017. Prices broke below $50 per barrel on March 9, 2017.

A Reuters survey estimates that Libya’s crude oil production rose by 50,000 bpd to 930,000 bpd in September 2017—compared to the previous month.

October natural gas futures contracts rose by 0.86% on September 24. Natural gas prices rose despite a larger-than-expected rise in the natural gas inventory.

July WTI crude oil futures trading on NYMEX showed the rectangular trading range pattern. Prices have been fluctuating between $58 and $61 per barrel for a few weeks.

Cushing is the largest crude oil storage hub in the United States. A market survey estimates that Cushing inventories fell from August 4 to August 11.

The EIA estimates that the global crude oil supply could outstrip demand by 1.1 MMbpd (million barrels per day) in 2H16—compared to 2.2 MMbpd in 1H16.

WTI (West Texas Intermediate) crude oil futures contracts for January delivery rose slightly by 0.4% and closed at $43.04 per barrel on Wednesday.

April gasoline futures fell 2.4% to $1.65 per gallon on March 8, 2017. Prices fell despite the massive fall in US gasoline inventories.

US distillate inventories increased for the sixth time in the last seven weeks. The inventories rose ~11% in the last seven weeks.

May natural gas futures fell by 4.47% and settled at $2.52 per MMBtu on April 9, 2015. Natural gas prices plunged because of the massive inventory buildup.

The energy sector contributed to ~6.6% of the S&P 500 (SPY) (SPX-INDEX) on April 13, 2017. Oil and gas are major parts of the energy sector.

PointLogic estimates that US natural gas consumption dropped ~1.4% to 56.7 Bcf per day on May 17–23.

OPEC’s meeting in Vienna is scheduled on Thursday, June 2, 2015. There aren’t any optimistic cues that the group will reach an agreement to cap production.

Crude oil prices were $54.1 per barrel on December 28—the highest since July 14, 2015. As of January 16, 2017, crude oil prices are 3.4% below their highs.

The rise in crude oil export capacity suggests that Iran’s getting ready for a massive increase in crude oil production in 2018.

Current lower oil prices and growth from China, India, the United States and Asia Pacific countries will drive crude oil consumption in the long term.

On Thursday, September 3, 2015, natural gas prices rallied due to speculation of an increase in demand for natural gas as a result of the warm weather forecast.

The US Dollar Index rose 0.4% to 101.4 on November 18, 2016—the highest level in the last 13 years. It also rose 4% in the last two weeks.

Libya’s crude oil production was at 1,030,000 bpd in July 2017. Production has risen ~60% from its levels in January 2017.

A meeting of oil producers is scheduled in Doha, Qatar, for April 17. The meeting is meant to support crude prices and will focus on freezing production.

The difference between actual and expected changes in US crude oil inventory levels affects crude prices and thus revenues and earnings of major companies.

Gold prices gained 1.71% YTD (year-to-date)—despite the US Dollar Index increasing by almost 9% YTD. Prices are in a long-term downtrend.

September WTI crude oil futures contracts trading in NYMEX rose slightly by 0.64% on August 14. Crude oil prices rose despite oversupply concerns.

The American Petroleum Institute will release its crude oil inventory report on Tuesday, December 5, 2017.

September natural gas futures contracts fell by 4.91% on August 13, 2015. Prices fell due to a better-than-expected rise in natural gas inventory data.

The EIA estimated that US crude oil inventories fell by 3.4 MMbbls (million barrels) to 453.7 MMbbls on November 17–24, 2017.

According to the Wall Street Journal, Saudi Arabia’s crude oil production hit 10.7 MMbpd (million barrels per day) in June 2017.

Goldman Sachs expects Brent crude oil to average $58 per barrel in 2H17. Likewise, it expects WTI crude oil prices to average $57.50 per barrel.