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Why Crude Oil Prices Declined for the Second Day in a Row

Gordon Kristopher

All Eyes on US Crude Inventory and OPEC Production on May 3

Crude oil prices fell 

On May 2, 2016, June WTI (West Texas Intermediate) crude oil futures contracts trading on the New York Mercantile Exchange fell by 2.5% and settled at $44.8 per barrel. Brent crude oil futures trading on the Intercontinental Exchange also fell slightly by 0.06% to $48.1 per barrel. Prices fell due to the expectation of rising US crude oil inventory.

Oil-tracking ETFs including the United States Oil Fund (USO) and the ProShares Ultra Bloomberg Crude Oil ETF (UCO) also took a hit on May 2, with USO dropping by ~2.2% and UCO falling by 4.6%.

Cushing crude oil stocks 

The market intelligence data company Genscape reported that Cushing crude oil stocks rose by 821,969 barrels for the week ending April 29, 2016, compared to the previous week. (For more on Cushing crude oil stocks, read Cushing Crude Oil Stocks: Largest Build since December 2015.”)

OPEC crude oil production

Reuter’s reported that OPEC (Organization of the Petroleum Exporting Countries) crude oil production increased by 170,000 bpd (barrels per day) to 32.64 MMbpd (million barrels per day) in April 2016 as compared to the previous month. The rise in OPEC’s crude oil production adds to the global oil glut. (For more on Iraq’s exports, check out “Iraq’s High Crude Oil Exports Could Impact the Crude Oil Market.”) 

Falling crude oil prices

WTI and Brent crude oil prices hit 2016 highs on April 28, 2016. Oil prices fell for the second day on May 2, 2016, due to the rise in OPEC crude oil production and estimates of another rise in nationwide and Cushing crude oil stocks. Low crude oil prices affect oil and gas exploration and production companies like QEP Resources (QEP), Synergy Resources (SYRG), and Energy XXI (EXXI). The volatility in crude oil prices also affects ETFs and ETNs like the ProShares Ultra Oil & Gas ETF (DIG), the iShares Global Energy ETF (IXC), and the Fidelity MSCI Energy (FENY).

Low crude oil prices affect oil and gas exploration and production companies like QEP Resources (QEP), Synergy Resources (SYRG), and Energy XXI (EXXI). The volatility in crude oil prices also affects ETFs and ETNs like the ProShares Ultra Oil & Gas ETF (DIG), the iShares Global Energy ETF (IXC), and the Fidelity MSCI Energy (FENY).

Continue reading this series for a closer analysis of US crude oil production and inventory, as well as those of OPEC nations including Saudi Arabia and Iran. Let’s start with expectations from the American Petroleum Institute.

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