Crude Oil Prices Rise on Improving Sentiments from China
Will the Crude Oil Market Sustain the Recent Rebound?
Crude oil prices rally for the first time in the last six days
This series analyzes crude oil and natural gas prices and fundamentals. For an in-depth fundamental look at oil and gas and related companies, sectors, and drivers, please refer to our Energy and Power page.
August WTI (West Texas Intermediate) crude oil futures contracts rallied for the first time in the last six days. Crude oil prices rose by 2.18% and closed at $52.78 per barrel on Thursday, July 9, 2015. Prices retreated due to the improving sentiments on Chinese economic stability. WTI tracking ETFs like the United States Oil Fund LP (USO) and the ProShares Ultra DJ-UBS Crude Oil (UCO) also rose in yesterday’s trade. They rose by 1.90% and 3.66%, respectively, on July 9, 2015.
Chinese markets rebounded in yesterday’s trade as the government’s emergency rescue measure banned major stockholders from selling stakes in listed companies. In the oil market, market surveys projected that Chinese demand for crude oil will continue to be strong despite the Chinese market crash and slowing economic growth. Chinese demand will surge in 2H15 as it builds huge inventories.
The dragging Iran nuclear deal also fueled optimism in the crude oil market. Senior US officials reported that there’s a 50 % chance of finalizing the deal. In contrast, the Russian foreign ministry expects the Iran nuclear deal with the heavyweights is 95% complete. The deadline for Iran’s nuclear deal is Friday, July 10, 2015.
WTI prices rose for the fourth time in the last ten days. Oil prices fell by 3.06% more on the average down days than on the average up days, during the same period. WTI futures for August delivery fared well among all of the other commodities in yesterday’s trade. Prices rose by a meager 0.18% YTD (year-to-date)—led by falling US inventories.
The uncertainty in the crude oil market impacts oil and gas producers like Pioneer (PXD), Noble (NBL), and ConocoPhillips (COP). Combined, they account for 7.65% of the Energy Select Sector SPDR ETF (XLE). These companies also have an oil production mix that’s greater than 41% of their total production.
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