Factory activity in China, the world’s biggest oil importer, shrank for a third month in February as export orders fell at the fastest pace since the financial crisis a decade ago. Lighthizer said issues with China were “too serious” to be resolved with promises from Beijing to purchase more U.S. goods and any deal needed to include a way to ensure commitments were met. Crude prices have also been dragged down by surging U.S. oil production, rising more than 2 million barrels per day (bpd) in the past year to a record 12.1 million bpd. Click read more below for additional detail.
NYMEX-traded WTI (West Texas Intermediate) crude oil futures contracts for November delivery fell by 5.1% and closed at $47.10 per barrel on Monday, October 12, 2015. Prices fell due to mounting production from OPEC (Organization of the Petroleum Exporting Countries) despite the long-term oversupply concerns. ETFs like the United States Oil Fund LP (USO) and the ProShares Ultra DJ-UBS Crude Oil (UCO) mirrored WTI prices in yesterday’s trade. These ETFs fell by 4.3% and 8.3%, respectively, on October 12, 2015.
OPEC released its MOMR (Monthly Oil Market Report) on October 12, 2015. The MOMR highlighted that OPEC produced 31.6 MMbpd (million barrels per day) of crude oil in September 2015. The record production from OPEC ignited the long-term pessimistic sentiments of oversupply. As a result, crude oil prices fell more than 5% in Monday’s trade. The speculation of rising production from OPEC will continue to impact the crude oil market.
The API (American Petroleum Institute) will release its weekly US commercial crude oil inventory report on October 14, 2015. Last week, the API estimated that crude oil stocks fell by 1.2 MMbbls for the week ending October 2, 2015. The consensus of rising crude oil stocks will put downward pressure on crude oil prices.
The beginning of the winter season will mark the seasonal refinery maintenance. The seasonal refinery maintenance will curb the average demand for crude oil. The end of the summer driving season will also curb the demand for crude oil. The seasonality factor will negatively influence crude oil prices.
Long-term lower crude oil prices will impact US oil producers like Marathon Oil (MRO), Murphy Oil (MUR), and Noble Energy (NBL). These companies’ crude oil production mix is more than 50% of their total production. These stocks have lost more than 40% in the last year. The volatility in the oil market also impacts ETFs like the iShares U.S. Oil & Gas Exploration & Production ETF (IEO) and the iShares Global Energy (IXC).
The commodity tracking Bloomberg Commodity Index also fell in the direction of crude oil prices in yesterday’s trade. It fell by 13.7 YTD (year-to-date). Likewise, US crude oil prices also fell more than 10% YTD due to long-term oversupply concerns.