Oil prices fall as US stockpiles grow

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May 29, 2019 3:21pm NYSE:USO

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From Jayson Derrick:

Brent crude and West Texas Intermediate futures were each lower by around 2 percent Wednesday morning with multiple factors at play.

What To Know

U.S. and China trade tensions continue showing no signs of a near-term resolution which could translate to limited oil demand and investors taking a risk-off approach, according to The Wall Street Journal.

Adding to the ongoing trade tension, an anonymous official in China suggested the country could restrict how much rare-earth elements can be exported, according to WSJ.

The global supply of available oil is also factoring into lower prices. Specifically, U.S. crude stockpiles rose at the fastest pace seen since 2016. Coupled with the potential for increased production from the Organization of the Petroleum Exporting Countries and its allies, the oil market could see another glut.

Why It’s Important

Hedge funds and speculative investors continued to lower their exposure to instruments tied to higher U.S. crude prices for the fourth consecutive week, WSJ separately reported. Other investors are showing concerns a weakening global economy can add another risk element to oil prices

OPEC and its allies will meet in June for a scheduled meeting with multiple potential outcomes being explored. Concerns of a global glut could prompt the oil-producing nations to continue slashing production according to previously set targets through the end of the year.

The United States Oil Fund LP USO 0.12% was trading lower by 2.5 percent to $11.92 at time of publication.

The United States Oil Fund LP (USO) was trading at $12.22 per share on Wednesday afternoon, down $0.01 (-0.08%). Year-to-date, USO has gained 1.75%, versus a 4.37% rise in the benchmark S&P 500 index during the same period.

USO currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 109 ETFs in the Commodity ETFs category.

This article is brought to you courtesy of Benzinga.

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