Crude Oil Prices Hit a Fresh 2016 High: What's Next?
Crude oil prices rose
June WTI (West Texas Intermediate) crude oil futures contracts rose by 3.3% and settled at $47.72 per barrel on May 16, 2016. Similarly, Brent crude oil futures also rose by 2.4% to $48.97 per barrel. Prices rose due to the supply outage from Canada to Nigeria. Oil tracking ETFs like the United States Oil Fund (USO) and the ProShares Ultra Bloomberg Crude Oil ETF (UCO) also rose on May 16, 2016. They rose by 3.4% and 6.7%, respectively, on the same day.
Monthly drilling report
The EIA (U.S. Energy Information Administration) released its monthly drilling report on May 16, 2016. The report expected crude oil production to decline by 113,000 bpd (barrels per day) to 4.9 MMbpd (million barrels per day) in June 2016—compared to May 2016—in the key shale regions. Crude oil production will decline in the Bakken and Eagle Ford shale regions during this period. Read US Crude Oil Production Fell for 15th Straight Week: What’s Next? for more on US crude oil production. The slowing crude oil production will support crude oil prices.
Supply outages for OPEC and non-OPEC producers
Supply outages in OPEC (Organization of the Petroleum Exporting Countries) supported crude oil prices in April and May 2016. Nigeria’s production declined to a 2009 low due to multiple pipeline outages. This could lead to a decline in Nigeria’s production by 600,000 bpd. The IEA (International Energy Agency) reported that Nigeria’s crude oil production fell to 1.7 MMbpd in March 2016—the lowest level since 2009. Political unrest in Libya also led to a supply outage. The production at Canadian oil sands fell due to wildfires. Citigroup estimates that the total global supply outage could be around 3.5 MMbpd.
OPEC’s monthly report
OPEC released its monthly oil market report on May 13, 2016. The report showed that OPEC’s crude oil production increased by 188,000 bpd to 32.4 MMbpd in April 2016—compared to March 2016. The rise in crude oil production from OPEC will have a negative impact on crude oil prices. To learn more, read OPEC Crude Oil Production Data Ignites Concerns of Oversupply.
Crude oil prices hit a new 2016 high
So far, crude oil prices are up more than 20% in 2016. They have gained almost 70% since the lows in February 2016. The uptick in crude oil prices benefits Bill Barrett (BBG), Halcon Resources (HK), Cobalt International Energy (CIE), and Denbury Resources (DNR). WTI and Brent crude oil prices hit 2016 highs on May 16, 2016. Oil and gas prices also influence ETFs and ETNs like the iShares US Oil Equipment & Services ETF (IEZ), the ProShares Ultra Oil & Gas ETF (DIG), and the Fidelity MSCI Energy (FENY).
This series focuses on the American Petroleum Institute’s crude oil inventories, Cushing crude oil inventories, the US crude oil rig count, the U.S. Commodity Futures Trading Commission’s “Commitment of Traders” report, and the crude oil price forecast.
Browse this series on Market Realist: