Why Crude Oil Futures and the S&P 500 Diverged Last Week

Crude oil futures  

January West Texas Intermediate (or WTI) crude oil futures (DWT) (USL) contracts rose 1.7% to $58.36 per barrel on December 1, 2017. February Brent (BNO) oil futures rose 1.7% to $63.73 per barrel on the same day. Prices advanced due to the extension of ongoing production cuts until December 2018. The weak dollar (UUP) also supported oil (UWT) (USO) prices on December 1, 2017.

Why Crude Oil Futures and the S&P 500 Diverged Last Week

US crude oil production 

Oil (SCO) (DBO) prices are near their 30-month high. US crude oil prices had fallen 1% last week. They had dropped due to record US crude oil production for the week ended November 24, 2017. Meanwhile, on November 30, 2017, the EIA reported that monthly US crude oil production hit 9,481,000 bpd (barrels per day) in September 2017. It was the highest monthly crude oil production since April 2015. US production and oil (UCO) prices are usually closely related. Higher oil prices benefit oil producers (XLE) (XOP) like Noble Energy (NBL), Devon Energy (DVN), and Marathon Oil (MRO).

Wall Street’s performance 

The NASDAQ (QQQ), S&P 500 (SPY) (SPX-INDEX), and Dow Jones Industrial Average Index (DIA) fell 0.38%, 0.2%, and 0.17%, respectively on December 1, 2017. The industrials (XLI) and materials (XLB) sectors dragged SPY on December 1, 2017.

However, the S&P 500 was up 1.5% last week. The telecommunication (VOX) (IYZ), financials (XLF) (VFH), industrials (XLI) (ITA), and energy (VDE) (RYE) sectors supported SPY last week. The IT (XLK) (VGT) and real estate (VNQ) (IYR) sectors capped the upside for SPY last week.

Series overview 

This series covers OPEC’s production cut extension, the US dollar, Cushing inventories, US oil rigs, and oil price drivers for this week.