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Why Is the Risk in Oil Prices Rising?

PART:
1 2 3 4 5
Why Is the Risk in Oil Prices Rising? PART 1 OF 5

Why Is the Risk in Oil Prices Rising?

US crude oil

On December 5, 2017, US crude oil (USO) (USL) January 2018 futures rose 0.3%. The American Petroleum Institute’s oil inventory data might have supported oil prices on the same day. We’ll discuss the oil inventory in Part 3 of this series.

Why Is the Risk in Oil Prices Rising?

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In the week ending November 24, 2017, US crude oil production was at 9.68 MMbpd (million barrels per day)—a record high. Strong US crude oil production and oil exports could be a risk for oil prices. In the next part, we’ll discuss US crude oil production. We’ll discuss US oil exports in Part 5 of this series.

After OPEC announced a nine-month extension to the production cut deal on November 30, 2017, US crude oil prices rose 0.4%. So, the news was already discounted in oil prices.

In the trailing week, the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) rose 0.1% and 1.4%. The fall of 0.6% in US crude oil January futures during this period might have been a drag on these equity indexes.

Moving averages

On December 5, 2017, US crude oil active futures were 1%, 6.7%, 12.7%, and 15.5% above their 20, 50, 100, and 200-day moving averages, respectively. The 20-day moving average near $57 is an immediate support for oil prices. The level will be crucial to watch on December 6, 2017, when the EIA releases oil inventory data. The 50-day moving average was 8.3% above the 200-day moving average—a sign that might support oil prices.

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