US Crude Oil at New High, but Is Upside Limited?


Dec. 4 2020, Updated 10:52 a.m. ET

US crude oil

On November 2, 2017, US crude oil (USO) (USL) December futures rose 0.4% and settled at $54.54 per barrel, the highest closing price for US crude oil active futures in 2017.

The possible extension of the production cut deal could be behind oil’s rise. OPEC will make a decision on the extension on November 30, 2017. The lower US oil rig count could be another bullish factor for oil prices.

However, higher oil prices could encourage US oil producers to add more oil rigs to enhance their production. So any rise in US crude oil production could increase oil supplies and pull oil prices down. Moreover, US oil exports were above 2 million barrels per day in the week ended October 27, 2017, the highest since 1991. These factors may limit the upside in US crude oil prices.

In the past five trading sessions, US crude oil futures rose 3.6%. During this period, the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) rose 0.8% and 0.5%, respectively. In the next part, we’ll analyze oil’s impact on these equity indexes.

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Natural gas

On November 2, 2017, natural gas (UNG) (FCG) (BOIL) December futures rose 1.5% and closed at $2.94 per MMBtu (million British thermal units). On the same day, the EIA (US Energy Information Administration) reported inventory data for the week ended October 27, 2017. Natural gas inventories rose by 65 Bcf (billion cubic feet), two Bcf more than markets expected. However, in the trailing week, natural gas futures fell 3.8%, which could be because of the bearish weather outlook.


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