U.S. Markets close in 5 hrs 54 mins

How Did the Crude Oil Inventory Report Affect Crude Oil Prices?

Gordon Kristopher

How Did the Crude Oil Inventory Report Affect Crude Oil Prices?

Crude oil prices 

June WTI (West Texas Intermediate) crude oil futures contracts rose for the second straight day by 3.8% and closed at $42.63 per barrel on Wednesday, April 20, 2016. Brent crude oil futures also rose by 4% to $45.80 per barrel. Crude oil prices rose due to a less-than-expected rise in the US crude oil inventory. The United States Oil Fund (USO) and the ProShares Ultra Bloomberg Crude Oil ETF (UCO) also rose by 3% and 5.7%, respectively, on the day.

Another meeting of oil producers

On April 20, 2016, Iraq’s deputy oil minister stated that major oil producers will meet in Russia, possibly in May 2016, to push oil producers to agree to an output freeze to boost oil prices. However, Alexander Novak, Russia’s energy minister, reported that there is no meeting of oil producers scheduled in Russia. On April 17, 2016, major oil producers failed to reach an agreement to freeze crude oil production to support crude oil prices. Read Hopes for Oil Producer Meeting Boosted Prices for Last 2 Months and Why Did the Doha Oil Producer Meeting Fail? to learn more. Crude oil traders expect another meeting in the future. This has boosted crude oil prices.

Latin American oil producers postpone meeting

Latin American oil producers Venezuela, Colombia, Ecuador, and Mexico were expected to meet in Quito on March 11, 2016, to discuss stabilizing oil prices. However, this meeting was delayed due to scheduling difficulties. It was expected to be rescheduled for late March or early April. However, there haven’t been any signs of a rescheduled meeting. Crude oil production from Mexico, Venezuela, and Colombia is declining due to lower crude oil prices. Low crude oil prices lead to less capital spending on oil and gas exploration projects. As a result, oil production tends to decline.

US crude oil contracts expire

WTI crude oil futures contracts for May delivery expired on April 20. May WTI crude oil futures contracts rose by 3.8% and settled at $42.63 per barrel on the same day. Short covering at expiration supported crude oil prices. High crude oil prices benefit oil producers like Cobalt International Energy (CIE), SM Energy (SM), Matador Resources (MTDR), and Energy XXI (EXXI). 

US crude oil inventory report

The EIA (U.S. Energy Information Administration) released its weekly crude oil inventory report on April 20. To learn more about the US crude oil inventory, read the next part of this series.

The volatility in crude oil prices impacts ETFs and ETNs like the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the ProShares Ultra Oil & Gas ETF (DIG), the First Trust Energy AlphaDEX Fund (FXN), and the VelocityShares 3x Inverse Crude Oil ETN (DWTI).

Series focus

This series covers US crude oil production and imports, refinery demand, and US gasoline and distillate prices. First, we’ll look at the US crude oil inventory for the week ending April 15 in the next part of this series.

Continue to Next Part

Browse this series on Market Realist: