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Refinery Margins and US Oil Production Could Pressure Oil Futures

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Energy calendar 

The EIA (U.S. Energy Information Administration) will release its weekly crude oil production data on January 24, 2018. Baker Hughes will release its weekly US crude oil rigs report on January 26, 2018. All of these events could impact oil (USL) prices this week. WTI oil (DWT) prices declined 1.4% last week. However, prices increased 5.2% year-to-date, which is bullish for the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

US crude oil futures’ peak  

US crude oil (USO) futures closed at $64.30 per barrel on January 12, 2018—the highest level since December 2014. Ongoing production cuts, supply outages, and strong oil demand have supported oil prices.

Higher compliance with production cuts, a fall in the US and global oil inventories, and an unexpected supply outage could support oil prices. Higher oil (UCO) prices favor energy producers (VDE) (XLE) like Chevron (CVX), SN Energy (SN), and ExxonMobil (XOM).

Bearish driver for US crude oil futures 

US crude oil production could hit a record 10,000,000 bpd in the coming weeks. It could cap the upside for oil prices. Any increase in US gasoline inventories could also limit the upside for oil prices.

Crude oil prices are near a three-year high. Higher oil prices could have a negative impact on refinery margins, which could impact refinery demand and pressure oil prices.

Refineries’ routine maintenance in the spring could also have a negative impact on demand and oil prices.

Crude oil price volatility 

The CBOE Crude Oil Volatility Index (OVX) rose 4% to 22.03 on January 22, 2018—near a three-year low. It suggests less volatility in oil (DBO) prices. 

Read Can OPEC and Natural Gas Production Support Natural Gas Bears? for the latest updates on natural gas.

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