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Crude Oil Prices Fell Due to the Massive Inventory Buildup

Gordon Kristopher

Crude Oil Prices Struggle to Hit $50 per Barrel

Crude oil prices fell for the first time in the last four days  

This series analyzes crude oil 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.

NYMEX-traded WTI (West Texas Intermediate) crude oil futures contracts fell for the first time in the last four days. Prices fell by 1.5% and closed at $47.81 per barrel on October 7, 2015. Natural gas prices fell due to the massive crude oil inventory buildup data. ETFs like the United States Oil Fund LP (USO) and the ProShares Ultra DJ-UBS Crude Oil (UCO) also mirrored the direction of crude oil prices in yesterday’s trade. These ETFs fell by 1.1% and 2%, respectively, on October 7, 2015.

US inventory  

The EIA (U.S. Energy Information Administration) released its weekly petroleum status report on October 7, 2015. The government data showed that crude oil stocks rose by 3.1 MMbbls (million barrels) for the week ending October 2, 2015. In contrast, the API (American Petroleum Institute) data showed that the US commercial crude oil stockpile fell by 1.2 MMbbls for the same period. The better-than-expected inventory weighed on crude oil prices. Meanwhile, the IEA (International Energy Agency) reported that the inventory in the industrialized countries hit 2.9 billion barrels in July. The speculation of rising crude oil stocks weighed on crude oil prices.

US crude oil production 

The EIA’s report added the US weekly production rose slightly by 76,000 bpd (barrels per day) to 9.2 MMbpd (million barrels per day) for the week ending October 2, 2015. The unexpected rise in the weekly crude oil production also put downward pressure on the crude oil prices. However, in its October STEO (Short-Term Energy Outlook) report, the EIA stated that the US crude oil production fell by 120,000 bpd to 9 MMbpd in September 2015. It’s the lowest level since September 2014.

Demand cues 

The economic slowdown in China and Japan could also weigh on the crude oil prices. China and Japan are the top crude oil consumers in Asia. The weak demand due to refineries’ seasonal maintenance could also curb crude oil’s domestic demand in the US.

Volatility analysis 

US crude oil prices fell for the fifth time in the last ten trading sessions. The prices rose by 1.5% more on the average up days than on the average down days over the same period. WTI crude oil was among the worst performers in yesterday’s trade. Silver was among the top performers across all of the commodities. Crude oil prices fell almost 10% YTD (year-to-date) due to oversupply concerns.

The roller coaster ride of crude oil prices impacts global oil majors like Total (TOT), BP (BP), Eni, Royal Dutch Shell, Statoil, Chevron (CVX), and ExxonMobil (XOM). Chevron and ExxonMobil account for 29% of the Energy Select Sector SPDR ETF (XLE). They also impact ETFs like the DB Energy Fund (DBE).

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