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Crude Oil Futures: Is It Time for a Correction?

PART:
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Crude Oil Futures: Is It Time for a Correction? PART 1 OF 6

US Crude Oil Futures and the S&P 500 Rose Last Week

US crude oil futures 

November US crude oil (UWT) (DWT) (USO) futures contracts rose 0.2% to $50.66 per barrel on September 22, 2017—a four-month high. Brent crude oil futures rose 0.8% to $56.86 per barrel on September 22, 2017—a five-month high.

US and Brent crude oil futures rose 1.5% and 2.2%, respectively, last week. Prices rose due to a recovery in US refinery crude oil demand and improving global crude oil demand. OPEC and non-OPEC producers’ meeting was held on September 22, 2017. The production cut deal was expected to be extended beyond March 2018, which also supported crude oil prices last week.

US Crude Oil Futures and the S&#038;P 500 Rose Last Week

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US refinery crude oil demand 

The U.S. Energy Information Administration estimates that US refinery crude oil demand rose by 1,094,000 bpd (barrels per day) to 15,172,000 bpd or 7.7% on September 8–15, 2017. However, refinery demand has fallen by 1,415,000 bpd or 8.5% year-over-year.

US refinery crude oil demand fell 20% or by 3,647,000 bpd on August 25–September 8 due to Hurricane Harvey in Texas.

Some surveys suggest that ~1,000,000 bpd of refining capacity is still offline in Texas after Hurricane Harvey. Motiva Enterprises and ExxonMobil’s (XOM) refineries in Texas are still operating at reduced capacity.

S&P 500 and Dow Jones 

The S&P 500 (SPY) and the Dow Jones Industrial Average Index (DIA) hit record levels of 2,508 and 22,410 on September 20, 2017. The S&P 500 and the Dow Jones Industrial Average Index rose 0.1% and 0.3%, respectively, on September 18–22, 2017.

The telecommunication (VOX) (IYZ), financials (XLF) (VFH), energy (XLE) (RYE), and industrials (XLI) (ITA) sectors rose 3.8%, 2.6%, 1.98%, and 1.95%, respectively, last week. These sectors supported the S&P 500 last week.

However, real estate (VNQ) (IYR), utilities (XLU) (VPU), and consumer staples (XLP) (VDC) fell more than 2% last week. These sectors limited the upside for the S&P 500 last week.

Series overview 

In this series, we’ll look at major oil producers’ meeting, the US dollar, crude oil price movements in the last 18 months, Cushing crude oil inventories, and the US crude oil rig count.

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