Brent and WTI Crude Oil Prices Rally Due to Short Covering

Gordon Kristopher
0

The Depressed Crude Oil Market and Oil Producers' Sustainability

Brent and WTI crude oil prices

The US benchmark WTI (West Texas Intermediate) crude oil futures contracts for February delivery rose by 1.6% and settled at $38.10 per barrel on December 24, 2015. Likewise, global benchmark Brent crude oil rose by 1.4% to close at $37.89 per barrel on the same day. Prices rose due to short covering and technical buying. Oil ETFs such as the United States Oil ETF (USO) and the ProShares Ultra Bloomberg Crude Oil ETF (UCO) also rose by 0.4% and 1.3%, respectively.

Short covering

The US benchmark and global benchmark crude oil prices are trading at record lows. US WTI is trading close to 2009 lows and Brent is trading close to its 11-year low. US oil prices gained more than 6% in the last three trading sessions. Oil prices have gained due to bargain buying and short covering. Meanwhile, the unexpected fall in the US crude oil inventory by 5.9 MMbbls (million barrels) for the week ending December 18 also boosted the crude oil prices. To learn more about global inventory read the next part of this series.

The increase in oil prices positively benefits US crude oil producers such as Pioneer (PXD), ConocoPhillips (COP), and Marathon Oil (MRO). In contrast, they negatively impact the revenues of US oil refiners such as Phillips 66 Company (PSX) and Valero Energy (VLO).

US crude oil ban lifted

On December 18, 2015, the US government lifted the 40-year-old crude oil export ban. The lifting of the ban means US oil producers can sell US crude oil to overseas countries. As a result, US crude oil prices have traded at a premium over Brent crude oil prices since January 2015. Top management from Hess (HES) suggests that the lifting of the 40-year-old export ban could push US crude oil prices by $5–$8 per barrel. For more information, read WTI and Brent Oil Spread Makes US Crude Oil Exports Unviable.

Hedge funds

Hedge funds increased their longs for the first time in the last six weeks on the speculation that oil prices could bottom out. This suggests hedge funds are using the bargain-buying opportunity. However, the overall crude oil trend is still bearish. Oil prices fell by 35% YTD (year-to-date) due to oversupply concerns. This bear market is expected to continue into 2016. Why? Read the next part of the series to know more.

Continue to Next Part

Browse this series on Market Realist:

Advertisement

Recommended Stories

  • Plug Power (PLUG) Reports Q1 Loss, Lags Revenue Estimates

    Plug Power (PLUG) delivered earnings and revenue surprises of -34.38% and 26.18%, respectively, for the quarter ended March 2024. Do the numbers hold clues to what lies ahead for the stock?

  • Billionaire Bill Gates Has 51% of His Portfolio Invested in 2 Brilliant Stocks

    The Bill and Melinda Gates Foundation Trust outperformed the S&P 500 by a wide margin over the past three years, in part because of these two stocks.

  • Can I Use My RMDs to Transfer Money Into My Roth IRA?

    If you're taking a required minimum distribution from an IRA, 401(k) or other tax-deferred account and don't need the money to cover living expenses, where should you stash that unneeded cash? Investors now need to start taking RMDs at age 73 or, if they were born after 1960, at age 75. Depending on the balances of […] The post Can I Use My RMDs to Transfer Money Into My Roth IRA? appeared first on SmartReads by SmartAsset.

  • Ask an Advisor: Can a Nursing Home Take Our IRA? We Have a $100K IRA and a Trust to Protect Our Assets

    My wife and I are elderly. I have an individual retirement account (IRA) worth about $100,000, and we have a trust set up through our children to protect our assets. If one or both of us have to go into … Continue reading → The post Ask an Advisor: Can a Nursing Home ‘Take Our IRA?' My Wife and I Are Elderly. We Have a $100K IRA and a Trust to Protect Our Assets. appeared first on SmartAsset Blog.

  • ‘Seriously Underwater’ Home Mortgages Tick Up Across the US

    (Bloomberg) -- Roughly one in 37 homes are now considered seriously underwater in the US and that share is much higher across a swath of southern states, according to data out Thursday.Most Read from BloombergMicrosoft’s Xbox Is Planning More Cuts After Studio ClosingsAmericans Are Racking Up ‘Phantom Debt’ That Wall Street Can’t Track‘Seriously Underwater’ Home Mortgages Tick Up Across the USArm Slides as Tepid Outlook Fuels Concerns Over AI SlowdownNationally, 2.7% of homes carried loan balanc

  • Morgan Stanley Predicts up to 110% Rally for These 2 ‘Strong Buy’ Stocks

    Uncertainty is the word of the day, in reference to the near-term economic future. Sentiment will hinge on the inflation numbers due out next week. March’s figure rose to 3.5%, and April’s job numbers showed a marked slowing in the labor market; that combination has stoked fears of stagflation. But – corporate earnings from Q1 are beating expectations, and the stock market has taken a turn for the better with the S&P 500 closing just below 5,200 yesterday. Economic strategists are still optimist

  • How Much Cash Can A $300,000 Annuity Generate For Me Each Month?

    Imagine having a reliable source of income you can count on throughout your retirement. That’s the promise of an annuity. These insurance products have been designed to turn your savings into a steady stream of monthly payments. They guarantee peace of mind and financial security in your golden years. Don't Miss: Are you rich? Here’s what Americans think you need to be considered wealthy. Can you guess how many Americans successfully retire with $1,000,000 saved? The percentage may shock you. An

  • Prospect Capital (PSEC) Q3 Earnings Beat Estimates

    Prospect Capital (PSEC) delivered earnings and revenue surprises of 15% and 5.82%, respectively, for the quarter ended March 2024. Do the numbers hold clues to what lies ahead for the stock?

  • Too many tractors: As boom times fade, farm equipment piles up

    Falling crop prices are leaving agriculture equipment sellers with an excess of unsold tractors and combines. The slower equipment sales are a knock-on effect of corn and soy prices dropping to more than three-year lows as U.S. farm income plummets and equipment makers and dealers are forced to pivot quickly after a period of booming business. Reuters interviewed ten equipment dealers, mostly in the Midwest, as well as farmers and analysts, who said low crop prices combined with persistently high interest rates are deterring farmers from purchasing machinery.

  • 1 Vanguard ETF That Can Serve as a Complete Stock Portfolio

    This single Vanguard ETF provides a straightforward path to a secure retirement.