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Strong Demand and Production Cuts Could Impact Crude Oil Futures

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US crude oil futures  

US crude oil futures (DWT) (UCO) contracts for March delivery rose 0.96% to $66.14 per barrel on January 26, 2018. Brent oil (BNO) futures contracts rose 0.14% to $70.52 per barrel on the same day.

Prices rose due to strong demand and ongoing production cuts. The US dollar (UUP) is at a three-year low, which also supported oil prices on January 26, 2018. Higher oil prices favor funds like the Vanguard Energy ETF (VDE), which rose 0.6% to 105.96 on January 26, 2018.

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Crude oil price performance 

Oil prices are at a three-year high. So far, US oil (UCO) (SCO) prices have risen 9.5% in January 2018 due to production cuts, a fall in US crude oil inventories, and strong demand. For oil, it’s the best January performance in 12 years. US oil (USO) prices rose 4.4% last week due to the above factors. The factors could push crude oil prices even higher.

Higher oil prices favor oil majors (IEZ) (XLE) like Chevron (CVX), ExxonMobil (XOM), and BP (BP). These stocks rose 0.4%, 0.7%, and 0.2%, respectively, on January 26, 2018.

Wall Street’s performance 

The NASDAQ (QQQ) rose 1.3% to 7,505.77, while the S&P 500 (SPY) rose 1.2% to 2,872.87 on January 26, 2018. The Dow Jones Industrial Average (DIA) gained 0.85% to 26,616.71 on January 26, 2018. All three indexes closed at a record level on the same day. The strong 4Q17 earnings results have been driving Wall Street.

The S&P 500 rose 2.2% in the last five trading sessions. The health care (XLV), telecommunication (VOX) (IYZ), and consumer discretionary (XLY) (VCR) sectors rose more than 3% in the last five trading sessions. They supported SPY the most in the last five trading sessions. These sectors could drive SPY this week. Reuters expects earnings growth of 13.2% for 4Q17—compared to the previous estimate of 12% at the beginning of the year.

Series overview 

In this series, we’ll discuss the US dollar, Cushing inventories, US crude oil rigs, and some drivers for oil prices this week.

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