Crude Oil Prices Are Seeing a Lot of Volatility (Part 1 of 4)
Oil price movement
Brent and WTI prices closed at $57.87 and $51.64, respectively, on Friday, April 10, compared to the previous Friday, April 3, when they closed at $58.12 and $49.14, respectively.
A bearish inventory report from the EIA clouded whatever positive movements prices saw last week, pulling prices lower.
Lower prices hurt the margins of companies like Pioneer Resources (PXD), Apache (APA), ExxonMobil (XOM), and ConocoPhillips (COP). All these companies are components of the Energy Select Sector SPDR ETF (XLE). They make up ~25% of the ETF.
Let’s take at a look at a weekly recap of crude oil prices last week.
Recap
Crude oil prices started the week on a positive note, rising the most in two months, as Saudi Arabia increased prices for crude oil shipments to Asia. Prices were also boosted by an increase in demand from refineries.
WTI jumped ~6.1% compared to the previous market close to settle at $52.14, on Monday, April 6. Brent climbed 5.7% to $58.12.
Prices continued their rally into Tuesday amid speculation that crude oil production would start declining, given falling US rig counts. Perhaps due to a production decline, WTI increased 3.5% and settled at $53.98—the highest level in 2015 so far. Brent increased by ~1.7% to settle at $59.1 on Tuesday.
However, prices reversed their course on Wednesday, after the EIA’s report for the week ended April 3 showed another significant crude oil inventory build. Read EIA Reports Bearish Crude Inventory Data Last Week – What Does It Mean? to learn more.
WTI declined ~6.6% to settle at $50.42, while Brent declined by 6% to settle at $55.55 on Wednesday.
Global drivers
Crude oil prices rebounded the next day over some uncertainty in the Iran deal. Iran, an OPEC member, said that it would only be willing to curb its nuclear program if all economic sanctions against the country were lifted immediately. US and EU officials assert that sanction relief will come gradually.
Global powers, including the United States, are negotiating a deal with Iran intended to block Iran’s nuclear program in exchange for lifting US-led sanctions. Lifting these sanctions would mean that Iran would be able to increase its crude oil exports, which would mean more oil in the markets, in turn meaning lower prices. However, the latest development in the deal reversed the downward reaction that the deal had earlier garnered.
WTI prices increased ~0.7% to settle at $50.79, while Brent prices increased 1.8% to settle at $56.57 on Thursday.
The skepticism regarding the deal continued to boost prices the next day. WTI rose ~1.7% to $51.64, while Brent rose ~2.3% to $57.87 on Friday.
Continue to Part 2
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