WTI Recovers from 6-Year Lows as Gasoline and Diesel Prices Diverge
US crude oil prices
WTI (West Texas Intermediate) crude oil prices closed 5.8% higher on a weekly basis at $42.8 per barrel in the week ended August 28. Brent crude increased by 5% on a weekly basis, closing at $47.75 on August 28.
When crude oil prices (USO) rise, it’s positive for oil producers such as Murphy Oil (MUR), Cimarex Energy (XEC), Hess (HES), and Diamondback Energy (FANG). MUR, XEC, and HES make up 2.6% of the Energy Select Sector SPDR ETF (XLE).
Higher prices benefit MLPs as well. MLPs such as Plains All American Pipeline Partners (PAA) transport crude oil. Higher prices could eventually translate into higher transported volumes for these MLPs, meaning higher revenues.
Weekly recap
Between Friday, August 21, and Monday, August 24, WTI crude oil prices fell 5.46% to settle at $38.24 per barrel. This was the first sub-$40 settlement since 2009. Meanwhile, Brent fell 6% and closed at $42.69 per barrel. Prices fell as concerns about slowdown in demand from China prevailed, even as US crude oil supplies continued to expand.
However, WTI prices bounced back on Tuesday after the People’s Bank of China announced interest rate cuts to stimulate growth. China is the world’s second largest crude oil consumer. WTI gained 2.79% to settle at $39.31 per barrel. Brent increased 1.21% and settled at $43.21 per barrel on Tuesday.
Prices plunged on Wednesday following the release of the EIA inventory report. The report showed a surprise increase in gasoline inventories. Plus the EIA reported an increase in Cushing inventories as well. A drop in refinery inputs also lent bearish sentiment to crude oil prices. Read more about last week’s crude inventory report at US Crude Oil Inventories Surprisingly Fell: The Impact on WTI.
WTI crude fell 1.8% to settle at $38.6 per barrel and Brent remained mostly flat, settling at $43.14 per barrel on Wednesday.
On Thursday, WTI crude oil prices rebounded owing to a rally in Chinese stocks. Positive US economic growth indicators also fueled the increase. The Commerce Department revised the second-quarter GDP (gross domestic product) expansion to 3.7%. The initial growth estimate was 2.3%. Prices were also helped by a short-covering surge.
WTI jumped by ~10.26% to settle at $42.56 per barrel. This was the highest daily gain in six years. Brent crude oil increased by ~10.24% to close at $47.56 per barrel on Thursday. On Friday, August 28, the previous day’s gains were extended. WTI increased ~0.56% on Friday, while Brent increased ~0.4% to settle at $42.8 and $47.75 per barrel, respectively.
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