2 Oct

Will US Crude Oil Break above Its 2017 High?

WRITTEN BY Rabindra Samanta

US crude oil

On September 22–29, 2017, US crude oil (USO) (USL) (DBO) November futures rose 2% and closed at $51.67 per barrel on September 29, 2017—just 5.1% below the highest closing price in 2017.

In the seven calendar days to September 29, 2017, the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) rose 0.7% and 0.2%, respectively. US crude oil prices near the 2017 high could have a positive impact on these equity indexes.

Will US Crude Oil Break above Its 2017 High?

In the week ending September 29, 2017, the US oil rig count rose by six to 750. However, the pattern between oil prices and the oil rig count could signal a possible downturn in the US oil rig count. It would limit the upside in US crude oil production. Moreover, the EIA (U.S. Energy Information Administration) reported a fall of 1.8 MMbbls (million barrels) in US commercial crude oil inventories for the week ending September 22, 2017. In the same week, the US refinery utilization rate was 88.6%—5.4 percentage points above the previous week. It could have contributed to the fall in US crude oil stockpiles apart from the rise in the US crude oil exports. The rise in the Brent-WTI spread could be making US oil exports more profitable.

However, motor gasoline inventories rose by 1.1 MMbbls in the week ending September 22, 2017. US crude oil prices rose 0.5% after the EIA reported the oil inventory data on September 27, 2017. So, these bullish factors could push US crude oil prices above their 2017 high.

Natural gas

On September 22–29, 2017, natural gas (UNG) (GASL) (GASX) November futures fell 0.5% and closed at $3.01 per MMBtu (million British thermal units) on September 29, 2017.

On September 28, 2017, the EIA reported the natural gas inventory data. Natural gas inventories rose by 58 Bcf (billion cubic feet)—19 Bcf less than the market’s expected rise for the week ending September 22, 2017. On the same day, natural gas futures fell 1.4%. The Climate Prediction Center’s bearish weather outlook for the first two months of the winter in 2017–2018 could be behind the fall. Also, the forecast for mild weather this week could have a negative impact natural gas prices.

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