16 Jan

Will Crude Oil Futures and Wall Street Extend Their Rally?

WRITTEN BY Gordon Kristopher

US crude oil futures 

February WTI crude oil futures (UCO) (DBO) contracts rose 0.34% to $64.52 per barrel at 12:05 AM EST on January 16, 2018. It’s the highest level since December 2014. Prices rose due to ongoing production cuts and strong global crude oil demand.

Higher oil prices benefit funds like the Energy Select Sector SPDR Fund (XLE) and the Vanguard Energy ETF (VDE).

Will Crude Oil Futures and Wall Street Extend Their Rally?

Crude oil price performance 

Brent (BNO) and WTI crude oil (UCO) prices rose 3.3% and 4.7% last week. They’re at the highest level since December 2014. Falling US crude oil inventories, production cuts, and strong demand supported oil prices last week.

All of these factors could drive oil prices higher this week. Higher oil (UWT) (DWT) prices favor energy companies like Yuma Energy (YUMA) and Denbury Resources (DNR).

Russia and OPEC

On January 21, 2018, OPEC and non-OPEC producers’ meeting will be held in Oman. The meeting will focus on a smooth exit from the ongoing production cut. On January 12, 2018, Russia’s energy minister said that the country might discuss an exit from the ongoing production cut. Russia’s energy minister added that the oil market isn’t completely rebalanced. Any positive news about higher compliance might support oil prices. However, any negative news of unexpected exit plans might pressure oil prices.

Wall Street’s performance 

The NASDAQ (QQQ), the Dow Jones Industrial Average (DIA), and the S&P 500 (SPY) closed at record levels on January 12, 2018.

The expectation of strong 4Q17 earnings results has been driving SPY. SPY has risen 22.5% in the last 12 months. The IT (XLK) (VGT) sector rose ~40% during this period. It has been SPY’s biggest driver during this period.

The consumer discretionary (XLY) (VCR), financials (XLF) (VFH), industrials (XLI) (ITA), materials (XLB), and healthcare (XLV) sectors increased more than 20% in the last 12 months. These sectors supported SPY during this period. They will likely drive SPY in 2018.

In this series 

In this series, we’ll discuss Iran’s crude oil production, Cushing inventories, US oil rigs, and important drivers for oil prices this week.

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