Crude oil prices and US stock exchanges
June WTI (West Texas Intermediate) crude oil (USL) (PXI) (FENY) futures contracts are near a one-month low as of May 1, 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 6.5% YTD (year-to-date). However, US crude oil prices have fallen ~12.8% YTD. Meanwhile, US crude oil prices have risen ~2.7% in the last 12 months. SPY has risen ~15.4% 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
WTI crude oil prices settled at $54.45 per barrel on February 23, 2017—the highest level since June 2015. As of April 28, 2017, crude oil prices were 9.4% below their highs.
Key bullish drivers for crude oil in 2017
- a rise in US gasoline demand
- expectation of a fall in OECD crude oil inventories
- record Chinese 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 28, 2017, crude oil prices have risen 88.2% from their 2016 lows. Higher crude oil (ERY) (XES) (ERX) prices have a positive impact on oil producers’ earnings such as ConocoPhillips (COP), Carrizo Oil & Gas (CRZO), and PDC Energy (PDCE).
Key bearish drivers for crude oil in 2017
- a rise in US crude oil rigs to a two-year high
- near-record US crude oil inventories
- a rise in US crude oil production
Crude oil price forecasts
Crude oil prices are under pressure due to the factors mentioned above. Prices are trading below their 20-day, 50-day, 100-day, and 200-day moving averages of $51.3, $51.4, $53.2, and $51.7 per barrel as of May 1, 2017. It suggests more pain for oil prices. Any rise in supplies from the US could pressure crude oil prices. 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.