This series analyzes crude oil and natural gas prices and fundamentals. For an in-depth fundamental look at oil and gas and related companies, sectors, and drivers, please refer to our Energy and Power page. NYMEX-traded WTI (West Texas Intermediate) crude oil futures contracts for August delivery fell by 1.49% and settled at $50.15 per barrel on July 20, 2015. Prices fell due to the appreciating US dollar and oversupply concerns. ETFs like the United States Oil Fund LP (USO) and the ProShares Ultra DJ-UBS Crude Oil (UCO) also followed the price direction of US crude oil prices in yesterday’s trade. These ETFs fell by 1.77% and 3.44%, respectively, at the close of trade on July 20, 2015. Crude oil prices fell for the fourth day in a row ahead of the WTI futures contracts for August expiry on Tuesday, July 21, 2015. The appreciating US dollar against the basket of currencies led to the fall in crude oil prices. The US dollar appreciated on the better prospects of a rise in the interest rate by the Federal Reserve later in 2015. The strong dollar makes dollar-denominated crude oil expensive. Speculation of excess oil from Iran also put downward pressure on the crude oil market. It’s important to remember that the consensus of slowing economies from Europe and China could slow down the demand for crude and negatively impact the oil market. In contrast, the API (American Petroleum Institute) will release the weekly crude oil inventory data on July 21, 2015. The consensus of falling crude oil inventories could support crude oil prices. The global refineries are operating at maximum capacity. The refinery demand could support crude oil prices, but the refined product inventories are building across the globe. This is negative for crude oil prices. This is the fifth down day for crude oil prices in the last ten days. Over the same period, prices fell by 0.45% more on the average down days than on the average up days. August WTI futures were the worst performer across all of the other commodities in yesterday’s trade. Prices fell by 6.18% YTD (year-to-date), led by the strong dollar and oversupply factors. The long-term lower crude prices negatively affect upstream players like Hess (HES), Chevron (CVX), and Occidental Petroleum (OXY). Combined, these companies account for 17.78% of the Energy Select Sector SPDR ETF (XLE). Their crude oil production mix is greater than 53% of their total production. The API (American Petroleum Institute) will release the weekly US crude oil, gasoline, and distillate inventory report on July 21, 2015. Last week, the API data showed that crude oil inventories fell by 7.3 MMbbls (million barrels) for the week ending July 10, 2015. The API stockpile data are a precursor to the EIA’s (U.S. Energy Information Administration) weekly petroleum status report. The report is expected to release on Wednesday, July 22, 2015, at 10:30 AM EST. Last week, the EIA estimated that crude oil stocks fell by 4.3 MMbbls to 461.4 MMbbls for the week ending July, 10, 2015. Preliminary estimates from Reuter’s and Bloomberg suggest that crude oil stocks could fall by 2.1 MMbbls and 1.75 MMbbls, respectively, for the week ending July 17, 2015. The consensus of falling inventories will continue to put pressure on crude oil prices. Bloomberg estimates also added that refinery utilization is expected to remain unchanged at 95.30% for the week ending July 17—compared to the previous week. Gasoline inventories are expected to rise by 600,000 barrels to 218.6 MMbbls. Distillate stocks are estimated to rise by 1.8 MMbbls to 143.1 MMbbls in the week ending July 17, 2015. The inventory buildup by the refined products could negatively impact crude oil prices. Like the US, the refined product inventories hit a record level at Europe’s Amsterdam-Rotterdam-Antwerp storage hub. The world’s largest crude oil exporter is Saudi Arabia. Its inventories also hit record levels in May 2015. Saudi Arabian inventories rose by 9.3 MMbbls to more than 300 MMbbls in May 2015, according to data from the JODI (Joint Organization Data Initiative). Saudi Arabia is expecting that summer seasonal demand could bring down the crude oil stockpile. However, the massive inventories will continue to put downward pressure on crude oil prices. The lower crude oil prices will continue to impact oil and gas producers like ExxonMobil (XOM), Devon Energy (DVN), and Noble Energy (NBL). Combined, they account for 23.52% of the Energy Select Sector SPDR ETF (XLE). These stocks’ oil production mix is greater than 46% of their total production. The uncertainty in the crude oil market also affects ETFs like XLE and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

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