Decoding the US Crude Oil Inventory Report: Prices Hit 2016 Highs
Crude oil prices
June WTI (West Texas Intermediate) crude oil futures contracts rose by 2.9% and settled at $45.3 per barrel on April 27, 2016. Brent crude oil futures rose by 3.2% to $47.18 per barrel. Oil prices rose for the second straight day due to the depreciating US dollar. The United States Oil Fund (USO) and the ProShares Ultra Bloomberg Crude Oil ETF (UCO) also rose with crude oil prices. They rose by 3% and 6%, respectively, on April 27, 2016.
On April 27, 2016, the Fed left the key benchmark interest rate unchanged. However, it could increase the interest rate in June 2016. The improving labor market supports the Fed’s intentions to hike the interest rate. However, the volatile global market and lack of inflationary pressure in the US could be key to the Fed’s caution. The Fed’s delay in the interest rate hike led to the depreciation of the US Dollar Index on April 27, 2016. The US Dollar Index depreciated by 0.13%. It was trading at 94.53 levels on the same day.
The depreciating US dollar makes crude oil cheaper for oil importing countries. The PowerShares DB US Dollar Index Bullish ETF (UUP) tracks the performance of the US dollar. USO tracks the performance of US crude oil futures contracts. The above graph shows the inverse relationship between the US dollar and crude oil.
Crude oil prices hit 2016 high
WTI and Brent crude oil prices hit a 2016 high on April 27, 2016. They have gained almost 70% since the lows in February 2016. For the latest on the bullish catalysts, read What Are the Bullish Catalysts for Crude Oil Prices This Week? and Slower Non-OPEC Production and Other Bullish Forces for Crude Oil. Oil prices lost almost 58% since June 2014 due to oversupply. For more on bearish drivers, read Some Key Bearish Catalysts for Crude Oil Prices.
The roller coaster ride in crude oil prices impacts oil producers like Cobalt International Energy (CIE), PDC Energy (PDCE), SM Energy (SM), Matador Resources (MTDR), and Energy XXI (EXXI). It also impactsETFs and ETNs like the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the iShares US Oil Equipment & Services ETF (IEZ), the ProShares Ultra Oil & Gas ETF (DIG), and the VelocityShares 3x Inverse Crude Oil ETN (DWTI).
What this series covers
The U.S. Energy Information Administration released its weekly petroleum status report on April 27. To learn more about the US crude oil inventory, read the next part of this series. This series also covers US crude oil production and imports, refinery demand, and US gasoline and distillate prices and inventories.
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