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Saudi Arabia and the US Dollar Support Crude Oil Futures

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Crude oil futures 

March US crude oil futures contracts rose 2.4% to $60.60 per barrel on February 14, 2018. Brent oil futures rose 2.6% to $64.36 per barrel on February 14, 2018. Both of the benchmarks had the highest settlement since February 8, 2018.

The United States Oil ETF (USO) and the United States Brent Oil ETF (BNO) track US and Brent crude oil futures, respectively. USO rose ~2.6% to 12.1 on February 14, 2018, while BNO rose 2.4% to 17.6 on the same day. These ETFs are also near one-week highs.

Drivers for crude oil futures  

On February 14, 2018, Saudi Arabia’s energy minister said that ongoing supply cuts would continue until December 2018. The comment supported oil prices on February 14, 2018. He added that OECD crude oil inventories are near a three-year low, which indicates that oil markets are tightening. However, oil prices hit near a one-month low on February 13, 2018, due to the IEA’s bearish report.

The depreciating US dollar also supported oil prices on February 14, 2018. The US Dollar Index depreciated 0.65% to 89.12 on February 14, 2018—its biggest one-day decline since January 24, 2018. The US dollar is also near a three-year low.

The Power Shares DB US Dollar Bullish ETF (UUP) fell 0.7% to 23.23 on February 14, 2018. UUP tracks the US dollar’s performance, which is also near a three-year low.

WTI crude oil prices have risen ~41% since June 21, 2017, due to production cuts, strong oil demand, and a decline in global oil inventories. The Energy Select Sector SPDR ETF (XLE) and the Vanguard Energy ETF (VDE) have risen 7% since June 21, 2017. These ETFs have exposure to US oil and gas companies. 

Series overview 

The EIA released its weekly crude oil inventory report on February 14, 2017. In this series, we’ll discuss US oil inventories and production and US gasoline and distillate inventories.

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