Energy Commodities: Important Quantitative Insights PART 1 OF 5
Crude oil heads for a new 2017 low
On June 8, 2017, US crude oil (USO) (DBO) July futures settled at $45.64—0.2% below the previous price. On June 1–8, 2017, crude oil active futures fell 5.6%. On June 8, 2017, US crude oil active futures were 0.3% above their 2017 lows—based on closing prices.
US crude oil active futures fell 5.1% on June 7, 2017, after the EIA (U.S. Energy Information Administration) reported an unexpected build of 3.3 MMbbls (million barrels) in crude oil and total motor gasoline inventories for the week ending June 2. Analysts’ estimate suggests a build of 0.6 MMbbls in gasoline inventories and a fall of 3.1 MMbbls in crude oil inventories.
US crude oil production
US domestic crude oil production could touch 10 MMbpd (million barrels per day) in March 2018, according to the EIA’s Short-Term Energy Outlook released on June 6, 2017. The rise in US domestic crude oil production between November 2016 and March 2018 could be ~100% of OPEC’s pledged output cut.
In November 2016, OPEC members agreed to reduce their production by 1.2 MMbpd starting in January 2017. On May 25, OPEC members extended the production cut deal until March 2018.
Natural gas just above $3
Between June 1 and June 8, 2017, natural gas (UNG) July futures rose 0.7%. In the week ending June 2, 2017, the US natural gas inventory rose by 106 Bcf (billion cubic feet) compared to a market expectation of 99 Bcf (billion cubic feet)—based on EIA data released on June 8, 2017. On the same day, US natural gas active futures rose 0.3% and settled at $3.03 per million British thermal units—just above the $3 mark. Technical buying could be the reason for the rise in natural gas futures despite the inventory increasing above the market’s expectation.
Equity market performance
Between June 1 and June 8, 2017, the S&P 500 Index (SPY) rose 0.2%. The Dow Jones Industrial Average Index (DIA) rose 0.2% during the same period. Both of the equity indexes were in the green despite a fall in crude oil prices. In Part 2 of this series, we’ll discuss the correlation between equity indexes and crude oil.