Crude oil prices and US stock exchanges
June WTI (West Texas Intermediate) crude oil (IEZ) (PXI) (FXN) futures contracts are near a one-month low as of April 24, 2017. So far, crude oil prices and broader markets such as the S&P 500 (SPY) (SPX-INDEX) are diverging in 2017. SPY has risen 4.9% YTD (year-to-date). However, WTI crude oil prices have fallen ~11.8% YTD. Meanwhile, WTI crude oil prices have risen ~5.7% in the last 12 months. SPY rose ~12.3% during the same period. So, bullish momentum in the US stock market could partially support oil prices. For more on crude oil prices, read Part 1 of this series.
Crude oil’s highs in the last 15 months
US crude oil prices settled at $54.45 per barrel on February 23, 2017—the highest level since June 2015. As of April 21, 2017, crude oil prices were 8.9% below their highs.
Key bullish drivers for crude oil in 2017
- a rise in US gasoline demand
- record China’s crude oil imports
- a rise in India’s crude oil imports and demand in 2017
- a possible extension of major oil producers’ production cut deal
Crude oil’s lows in the last 15 months
US crude oil settled at $26.21 per barrel on February 11, 2016. Crude oil prices hit a 13-year low due to the following factors:
- record US crude oil production in 2015
- record OPEC crude oil production
- record Russian oil production
- record global crude oil and high refined product inventories
As of April 21, 2017, crude oil prices have risen 89.3% from their 2016 lows. Higher crude oil (ERX) (USL) (FXN) prices have a positive impact on oil producers’ earnings such as ConocoPhillips (COP), Swift Energy (SFY), Hess (HES), and Denbury Resources (DNR).
Key bearish drivers for crude oil in 2017
- a rise in US crude oil rigs to a 24-month high
- near-record US crude oil inventories
- a rise in US crude oil output
- near-record OECD crude oil inventories
- the expectation of a rise in crude oil production from Iran
Crude oil price forecasts
Crude oil prices are feeling the heat due to the factors mentioned above. Prices are trading below their 20-day, 50-day, 100-day, and 200-day moving averages of $51.4, $52, $53.4, and $51.7 per barrel as of April 21, 2017. The prices suggest more pain for oil prices. Any rise in supplies from the US could pressure crude oil prices.
Meanwhile, Russia’s central bank expects that Brent crude oil prices could fall as low as $40 per barrel by the end of 2017 if OPEC doesn’t extend major producers’ production cut deal in 2H17. For more on crude oil price forecasts, read the last part of the series.
In the next part of the series, we’ll look at how Cushing crude oil inventories impact crude oil prices.