What’s Causing the Turbulence in the Crude Oil Markets?
US crude oil
US crude oil (UWTI) (USO) (OIIL) (USL) (SCO) (DWTI) futures contracts for October delivery closed at $44.83 per barrel on September 6, 2016. That’s 0.9% above its previous closing price and ~12.5% below its highest level in 2016 of $51.23 per barrel on June 8.
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The fall in crude oil prices coincides with rising supply glut concerns. However, on September 2, the US job report numbers came in below the forecast. The weak job numbers could delay the Fed’s timing for the next rate hike. Consequently, oil prices rose 3% on September 2, 2016. The US Dollar Index (UUP) fell 1.1% and closed at 94.8 on September 6, 2016. We’ll look at the relationship between the US Dollar Index and crude oil prices later in this series.
Market participants are skeptical about the cooperation agreement between Russia and Saudi Arabia. However, the OPEC (Organization of the Petroleum Exporting Countries) meeting later this month could be a bullish catalyst for oil prices.
Key moving averages
Currently, crude oil futures are trading 4.9% below their 100-day moving average and 2.8% below their 20-day moving average. Prices breaking below their 100-day and 20-day moving averages indicate bearish sentiment for crude oil. The 20-day and 100-day moving averages might act as upside resistances for crude oil going forward. The above graph shows the price performance of crude oil futures relative to key moving averages.
Crude oil sentiments impact ETFs such as the United States Brent Oil ETF (BNO), the PowerShares DWA Energy Momentum ETF (PXI), the Vanguard Energy ETF (VDE), and the ProShares UltraShort Bloomberg Crude Oil (SCO).
In this series, we’ll analyze the impact of fundamental drivers such as the rig count, inventories, and the US Dollar Index on crude oil prices.
In the next part, we’ll see how rig counts are impacting oil prices.