Will WTI or Brent Follow Last Week's Trend?
WTI and Brent crude oil prices
WTI (West Texas Intermediate) crude oil prices closed at $40.54 on November 20. They fell ~0.8% in the week ending November 20, 2015—compared to the previous week ending November 13. In contrast, Brent crude oil prices rose by ~2.40% on a weekly basis. They closed at ~$44.66 per barrel on November 20.
What’s the impact?
When WTI crude oil prices fall, it’s negative for domestic crude oil producers like Cimarex Energy (XEC), Occidental Petroleum (OXY), Hess (HES), ConocoPhillips (COP), and Apache (APA). Domestic oil producers get less for their products compared to Brent prices. Brent is the international benchmark.
ConocoPhillips accounts for 11.7% and 3.6%, respectively, of the iShares US Oil & Gas Exploration & Production ETF (IEO) and the Energy Select SPDR ETF (XLE).
Why did WTI prices fall last week?
On Monday, November 16, 2015, WTI crude oil was $41.74 per barrel. This is $1 per barrel more than $40.74 per barrel on November 13. On November 16, both of the crude oil benchmarks rose due to security fears and geopolitical concerns regarding the terror attack in Paris. On November 17, the benchmarks fell more than 2%. They fell due to supply concerns after the API (American Petroleum Institute) hinted at a rise in the stockpiles.
The prices recovered slightly on Wednesday, November 18, due to a less-than-expected inventory rise. Analysts expected a rise by 2 MMbbls (million barrel). The actual reported inventory rose by 0.48 MMbbls. On November 19, the EIA (U.S. Energy Information Administration) reported similar inventory growth of 0.3 MMbbls. However, oversupply concerns still exist. As a result, the price fell slightly.
On Friday, November 20, crude prices fell slightly from $40.54 per barrel to $40.39 per barrel. The crude oil inventories rose eight weeks in a row. The strong dollar and rollover of expiring US spot crude oil contracts for December caused the crude prices to fall.
In the next part, we’ll provide more updates on Brent crude oil prices and spreads.
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