6 Dec

Why Is the Risk in Oil Prices Rising?

WRITTEN BY Rabindra Samanta

US crude oil

On December 5, 2017, US crude oil (USO) (USL) January 2018 futures rose 0.3%. The American Petroleum Institute’s oil inventory data might have supported oil prices on the same day. We’ll discuss the oil inventory in Part 3 of this series.

Why Is the Risk in Oil Prices Rising?

In the week ending November 24, 2017, US crude oil production was at 9.68 MMbpd (million barrels per day)—a record high. Strong US crude oil production and oil exports could be a risk for oil prices. In the next part, we’ll discuss US crude oil production. We’ll discuss US oil exports in Part 5 of this series.

After OPEC announced a nine-month extension to the production cut deal on November 30, 2017, US crude oil prices rose 0.4%. So, the news was already discounted in oil prices.

In the trailing week, the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) rose 0.1% and 1.4%. The fall of 0.6% in US crude oil January futures during this period might have been a drag on these equity indexes.

Moving averages

On December 5, 2017, US crude oil active futures were 1%, 6.7%, 12.7%, and 15.5% above their 20, 50, 100, and 200-day moving averages, respectively. The 20-day moving average near $57 is an immediate support for oil prices. The level will be crucial to watch on December 6, 2017, when the EIA releases oil inventory data. The 50-day moving average was 8.3% above the 200-day moving average—a sign that might support oil prices.

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