Why Did WTI Crude Oil Prices Rise Almost 6%?
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US benchmark WTI (West Texas Intermediate) crude oil futures contracts for April delivery rose by 5.8% and closed at $38.46 per barrel on March 16, 2016. Global benchmark Brent crude oil futures also rose by 4% and settled at $40.33 per barrel. Prices rallied due to oil producers’ meeting scheduled for April 17, 2016. The meeting is meant to stabilize the oil market. The less-than-expected rise in the US crude oil inventory also boosted crude oil prices. The Fed’s less hawkish meeting added to the crude oil market rally. Oil tracking ETFs like the United States Oil Fund (USO) and the ProShares Ultra Bloomberg Crude Oil ETF (UCO) rose by 5% and 9.8%, respectively, on March 16, 2016. The SPDR S&P 500 ETF (SPY) also rose marginally by 0.6% to $203.4 on the same day.
On March 16, 2016, Qatar’s oil minister Mohammed Bin Saleh Al-Sada reported that Russia, Saudi Arabia, Venezuela, and Qatar will meet in Doha on April 17, 2016. The meeting will renew talks to stabilize the oil market. He added that 15 OPEC (Organization of the Petroleum Exporting Countries) and non-OPEC producers, accounting for about 73% of the global crude oil production, are supporting this initiative. OPEC officials reported that Saudi Arabia, Kuwait, and their allies will freeze the oil output even if Iran doesn’t support this initiative. To learn more, read Iran’s Crude Oil Production: Biggest Gain in Almost 2 Decades. This meeting was initially scheduled for March 20, 2016. The delay in the meeting caused oil price volatility to rise. On February 16, these countries decided to freeze the crude oil production at January 2016 levels. To learn more about the historic deal, read Why Crude Oil Prices Fell despite the OPEC and Non-OPEC Deal.
Crude oil prices have rallied almost 45% since the lows of February 2016. The uptick in crude oil prices benefits oil producers like Ultra Petroleum (UPL), Whiting Petroleum (WLL), Warren Resources (WRES), and Bill Barrett (BBG). The volatility in oil prices also influences ETFs the Guggenheim S&P 500 Equal Weight Energy (RYE), the Vanguard Energy ETF (VDE), the iShares U.S. Energy ETF (IYE), and the Direxion Daily Energy Bull 3x Shares ETF (ERX).
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