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Will the US Dollar and Inventories Impact Crude Oil Futures?

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Nov. 20 2020, Updated 2:19 p.m. ET

Crude oil futures  

March US crude oil (DBO) (UWT) futures contracts increased 1.8% to $65.61 per barrel on January 24, 2018. Brent oil futures (BNO) rose 0.8% to $70.53 per barrel on the same day. Prices are at three-year highs, which benefits the ProShares Ultra Bloomberg Crude Oil (UCO). UCO increased 3.9% to 28.16 on January 24, 2018.

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US crude oil inventories and dollar 

US crude oil inventories declined for the tenth straight week. The EIA released the data on January 24, 2018. The data supported oil (USO) prices yesterday.

Meanwhile, the US dollar (UUP) is at a three-year low, which also supported oil prices on January 24, 2018. A weak dollar and the expectation of a fall in US crude oil inventories could drive crude oil prices higher next week.

The difference between the March and April US crude oil futures contract was at $0.25 per barrel on January 24, 2018—the highest level in three years. Prices could trend higher due to improving demand.

Ongoing production cuts

Brent and WTI crude (USL) (SCO) oil prices have risen more than ~50% since June 2017 due to ongoing production cuts, supply outages, the fall in US and global crude oil inventories, the weak dollar, and improving global demand.

Higher oil (DWT) prices favor energy producers (RYE) (XOP) like Carrizo Oil & Gas (CRZO), Diamond Offshore (DO), and Gastar Exploration (GST).

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Wall Street  

The NASDAQ (QQQ) and the S&P 500 (SPY) declined 0.61% and 0.06%, respectively, on January 24, 2018. They closed at record levels on January 23, 2018. The Dow Jones Industrial Average Index (DIA) rose 0.16% to 26,252.1 on January 24, 2018. It closed at a record level on January 24, 2018.

The S&P 500 increased 1.3% in the last five trading sessions. The consumer discretionary (XLY), telecommunication (VOX) (IYZ), and financials (XLF) (VFH) sectors have risen more than 2% in the last five sessions. These sectors could drive SPY in the coming weeks too.

Series overview  

In this series, we’ll discuss US crude oil inventories, oil production, and gasoline and distillate inventories.

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