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Closing PriceUS Oil Fund Partnership Units (USO)PrShrs Trust II Shs ProShares Ultra
Bloomberg Crude Oil (UCO)Jul '12Jan '13Jul '13Jan '14Jul '14Jan '15Jul '15Jan '16150%-100%-50%0%Source: BATS Exchange
Saturday, Feb 8, 17:00
Volatility picture
Oil prices have fallen by nearly 20% in 2016 due to the wide gap between supply and
demand. Historically low oil prices led to decreased spending on mega oil and gas
exploration projects. Companies like Concho Resources (CXO), Whiting Petroleum
(WLL), WPX Energy (WPX), and PDC Energy (PDCE) slashed the capital expenditure,
according to sources from data intelligence firm IHS (IHS) in order to sustain
themselves in the depressed oil and gas market.
US inventory
In the next part of this series, well discuss how the US crude oil inventory is
weighing on the global oil market. In Part 3 of this series, well discuss how the
record inventory is leading to a historic surge in the crude oil storage cost.
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Impact
The catastrophic fall in oil prices impacted oil producers like Anadarko Petroleum
(APC), Hess (HES), Energy XXI (EXXI), and Halcon Resources (HK). However, the rising
US and global inventory and contango market benefit oil tankers like Nordic
American Tankers (NAT), Teekay Tankers (TNK), Frontline (FRO), DHT Holdings (DHT),
and Tsakos Energy Navigation (TNP). In the next part, well discuss how the rising
crude oil inventory impacts rising crude oil storage costs.
ETFs like the United States Oil Fund (USO), the ProShares Ultra Bloomberg Crude Oil
ETF (UCO), and the iPath S&P GSCI Crude Oil Total Return Index ETN (OIL) are
influenced by the rise and fall in oil prices.
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Impact
The wide contango market supports oil tankers like Teekay Tankers (TNK), Frontline
(FRO), Euronav (EURN), DHT Holdings (DHT), and Tsakos Energy Navigation (TNP). In
the next part of this series, well discuss what drives crude oil storage costs.
Contango market traders margins also fall with the rise in storage costs. In the next
part, well provide the latest update on the US crude oil inventory.
ETFs and ETNs like the United States Oil Fund (USO), the iPath S&P GSCI Crude Oil
Total Return Index ETN (OIL), the VelocityShares 3X Long Crude Oil ETN (UWTI), and
the ProShares UltraShort Bloomberg Crude Oil ETF (SCO) are also impacted by
volatile crude oil prices.
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The volatility in the oil market benefits ETFs and ETNs like the United States Oil Fund
(USO), the iPath S&P GSCI Crude Oil Total Return Index ETN (OIL), and the ProShares
UltraShort Bloomberg Crude Oil ETF (SCO).
In the next part of this series, well discuss the U.S. Commodity Futures Trading
Commissions report.
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ETFs and ETNs like the United States Oil Fund (USO), the iShares U.S. Oil Equipment
& Services ETF (IEZ), the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the
Vanguard Energy ETF (VDE), and the First Trust Energy AlphaDEX Fund (FXN) are also
impacted by volatile crude oil prices.
In the next part of this series, well discuss the US crude oil rig count.
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The EIA (U.S. Energy Information Administration) estimates that US crude oil
production could fall by 600,000 bpd (barrels per day) in 2016. Wood Mackenzie
estimates that the global oil production fell by 100,000 bpd since the oil glut in June
2014. Morgan Stanley estimates that the oil glut market could balance after mid2017.
Refined products demand in the US fell by 3.9% in January 2016 compared to the
previous month. The speculation of a fall in the oil demand from the US and China
could impact oil prices. Read the next part of the series to learn more about Chinas
demand. To learn more about crude oil production, read Saudi Arabias Crude Oil
Production: Key for the Global Oil Market and OPEC Crude Oil Production Is Breaking
Records. To learn about Russias crude oil production, read Russias Production Will
Put More Pressure on the Crude Oil Market. In the next part of this series, well
discuss Chinas crude oil production.
ETFs
The roller coaster ride in the oil and gas market also impacts ETFs and ETNs like the
ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the First Trust Energy
AlphaDEX Fund (FXN), and the Vanguard Energy ETF (VDE).
also the fifth-largest crude oil producer in the world. Chinas crude oil production hit
4.3 MMbpd (million barrels per day) in 2015. The Chinese crude oil production is
expected to fall in 2016 due to the higher total cost of producing crude oil.
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In the next part of this series, well look at forecasts for crude oil prices.
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Impact
The speculation of long-term oversupply and lower oil prices could impact oil
producers profitability like PetroChina (PTR), Petrobras (PBR), Apache (APA),
Murphy Oil (MUR), and ConocoPhillips (COP). ETFs like the ProShares Ultra
Bloomberg Crude Oil ETF (UCO) and the ProShares UltraShort Bloomberg Crude Oil
ETF (SCO) are also impacted by the volatile crude oil market.
Read Will Russia and OPEC Join Hands and Cut Crude Oil Production? for more on
the crude oil market.