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Will Crude Oil Futures Break Key Resistance of $54 per Barrel?

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Dec. 4 2020, Updated 10:53 a.m. ET

Crude oil prices  

WTI (West Texas Intermediate) crude oil (RYE) (IXC) (IYE) futures contracts for May delivery rose 1.2% to $51.6 per barrel in electronic trade at 5:20 AM EST on April 5, 2017. Prices rose due to the API’s (American Petroleum Institute) bullish crude oil inventory report.

Prices are trading at a one-month high. Likewise, broader markets like the S&P 500 (SPY) (SPX-INDEX) and Dow Jones are near all-time highs. Bullish momentum in the US stock market could support oil demand and oil prices. The US is the largest crude oil consumer. For more on crude oil prices, read Part 1 of this series.

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Bearish drivers 

US crude oil futures are down ~9% year-to-date due to the following factors:

  • record US crude oil inventories—read Part 3 to learn more
  • US crude oil production could hit a 48-year high in 2018
  • near-record OECD crude oil inventoriesglobal oil inventories
  • expectation of a rise in crude oil production from Iran and Libya
  • US crude oil rig count hit a 19-month high
  • rise in Saudi Arabia’s crude oil production in March 2017
  • expectation of a strong US dollar (UUP) in 2017
  • near-record Cushing crude oil inventories

All of these bearish drivers could pressure crude oil prices. However, the bullish drivers discussed in Part 1 of this series pushed crude oil prices above their key moving averages. US crude oil prices are above their 20-day, 50-day, and 200-day moving averages of $49, $51.2, and $49.6 per barrel as of April 5, 2017. It suggests more bullish momentum for oil prices. Prices could even breach key resistance of $54 per barrel in the short term if US crude oil inventories and OECD crude oil inventoriesglobal oil inventories start falling.

Higher crude oil (VDE) (FXN) (UCO) (XLE) prices have a positive impact on oil and gas exploration and production companies like Noble Energy (NBL), Warren Resources (WRES), Chevron (CVX), and QEP Resources (QEP).

Next, we’ll look at the API’s estimates for US crude oil inventories.

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