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Why the Equity Market Could Be Dragging Oil Prices Down

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Nov. 20 2020, Updated 5:24 p.m. ET

US crude oil

On March 19, 2018, US crude oil May futures fell 0.4% and settled at $62.13 per barrel. On the same day, US crude oil May futures made a high of $62.44 per barrel. The $63 level could be difficult for US crude oil to penetrate.

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Is the equity market bringing oil down?

On March 19, 2018, the S&P 500 Index declined 1.4%. Facebook (FB) shares fell 6.8% on the same day and likely contributed to the sour market sentiment. Trade war concerns could be having a negative impact on growth-driven assets like equities and oil. The sentiment across both markets interact with each other.

In the last trading session, energy ETFs like the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), the Energy Select Sector SPDR ETF (XLE), and the Fidelity MSCI Energy ETF (FENY) declined 2.5%, 1.5%, and 1.6%, respectively.

In this series, we’ll discuss key quantitative data related to oil’s fundamentals—the production, inventory, and exports.

Moving averages

On March 19, 2018, US crude oil active futures were 0.4%, 4%, and 15.4% above their 20, 100, and 200-day moving averages, respectively. On March 16, 2018, US crude oil active futures moved above their 20-day moving average after trading below this level in the previous four trading sessions.

In the last trading session, US crude oil active futures were ~0.9% below their 50-day moving average. US crude oil prices below this shorter-term moving average could indicate short-term weakness in oil prices.

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