Iran and China: Key Catalysts for Crude Oil Prices
Crude oil prices
WTI (West Texas Intermediate) crude oil prices closed at $29.42 per barrel on January 15, 2016. That was a fall of 11.2%. Prices were $33.16 per barrel for the week ended January 8, 2016.
Brent crude oil prices fell by 13.7% for the week ended January 15, closing at $28.94 per barrel on January 15. Prices were $33.55 per barrel for the week ended January 8, 2016.
China stock markets collapse
So far in 2016, WTI crude oil prices have already posted losses of more than 20%. Brent crude oil prices have fallen more than 24%. Chinese stock markets fell 3.5% on Friday, January 15, 2016, the lowest close since December 2014. Crude oil prices were under tremendous pressure, as the fall raised concerns about Chinese crude oil imports and crude oil demand growth.
Crude oil production in Iran
Iran has the fourth largest crude oil reserves in the world. Now the United States has revoked its sanctions. Iran is expected to raise its exports by 1 MMbbl (one million barrels) within six months. This will put pressure on highly oversupplied crude oil markets.
Crude oil prices are expected to see new lows in the upcoming weeks. An increase in crude oil production in Iran may be bad timing, as spring refinery maintenance season will bring down crude oil demand.
Impact on crude oil producers
Lower crude oil prices can have a negative impact on revenues of crude oil producers. Many crude oil producers are already suffering from huge debt, which decreases their profitability. These crude oil producers include Cimarex Energy (XEC), ConocoPhillips (COP), Murphy Oil (MUR), Apache (APA), Occidental Petroleum (OXY), and EOG Resources (EOG).
ConocoPhillips (COP) makes up 4.5% of the Vanguard Energy ETF (VDE).
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