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Factors Impacting Crude Oil: China, Rig Count, and Spreads

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US crude oil active futures

On August 15, 2017, US crude oil (USO) (USL) September futures fell 0.1% and closed at $47.55 per barrel. From August 8 to August 15, 2017, US crude oil September futures fell 3.3%.

In the seven calendar days until August 15, 2017, the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) each fell 0.4%. During this period, the S&P 400 Mid-Cap Index (IVOO) fell 1.5%. Oil prices are crucial for these equity indexes.

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Factors impacting oil prices

Rising crude oil production among OPEC members and in the US has increased concern regarding oil’s supply-demand dynamics. Also, the fall in China’s refinery demands in July 2017 impacted oil prices negatively.

Moreover, the EIA’s[1. Energy Information Administration] Drilling Productivity report estimated that US shale oil production could climb to ~6.2 million barrels per day in September 2017. This level would represent its highest level since 2007.

Based on the EIA’s latest STEO (Short-Term Energy Outlook) report, by October 2017, US crude oil production could surpass its record level of ~9.6 million barrels per day in the week ended June 5, 2015. A rising oil rig count could be behind the rise in US crude oil production. We’ll discuss this topic in Part 2 of this series.

Moving averages

On August 15, 2017, US crude oil active futures stood 1.8%, 2.4%, 0.9%, and 3.6% below their 20-day, 50-day, 100-day, and 200-day moving averages, respectively. On August 14, 2017, US crude oil active futures fell below their 20-day and 100-day moving averages. The 50-day moving average stood 5.9% below the 200-day moving average—a bearish indicator that could add more woes to oil prices.

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