Crude Oil Prices React to Kuwait’s Comments and Inventory Data
Crude oil prices
May WTI (West Texas Intermediate) crude oil futures contracts rose slightly by 0.5% and settled at $35.89 per barrel on April 5, 2016. Brent crude oil futures also rose by 0.5% and closed at $37.87 per barrel. Oil prices rallied due to bullish comments from Kuwait. The United States Oil Fund (USO) and the ProShares Ultra Bloomberg Crude Oil ETF (UCO) fell 0.55% and 1.2%, respectively. The SPDR S&P 500 ETF (SPY) fell 1% to $204.14.
Kuwait and Saudi Arabia
On Tuesday, April 5, 2016, Kuwait’s OPEC (Organization of the Petroleum Exporting Countries) governor reported that an agreement may be reached during the oil producers meeting on April 17, 2016. However, Saudi Arabia and Kuwait decided to resume crude oil production at the jointly operated 300,000-barrel-per-day Khafji field. This means Saudi Arabia and Kuwait have to reduce crude oil production at others oilfields. Nonetheless, OPEC’s crude oil production rose in March 2016. Read How Is OPEC Crude Production Trending ahead of Doha Meeting? to learn more.
Likewise, Iran’s crude oil production also rose in March 2016. To learn more, read How Iran’s Production Was a Turning Point for Crude Prices in 2016. Further, Russia’s crude oil production hit a 30-year high. Read Do Current Crude Production Levels Bode Well for Doha Meeting? to learn more.
Volatility analysis
Oil prices have rallied almost 40% since the lows reached in February 2016. They have fallen almost 15% since March 22 highs.
Yesterday was the sixth down day for crude oil prices in the last ten days. Oil prices have fallen 2% more on the average down day than on the average up day. Volatile crude oil prices affect oil producers like EP Energy (EPE), W&T Offshore (WTI), Denbury Resources (DNR), and Cobalt International Energy (CIE).
Volatile prices also affect ETFs and ETNs like the United States Brent Oil Fund (BNO), the SPDR S&P Oil & Gas Equipment & Services ETF (XES), the Guggenheim S&P 500 Equal Weight Energy ETF (RYE), and the VelocityShares 3x Inverse Crude Oil ETN (DWTI).
To learn more, read about the bullish and bearish drivers of crude oil prices in the next three parts of this series. In the last two parts of this series, we’ll discuss US crude oil, gasoline, and distillate inventories.
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