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US Crude Oil Could Move above $70

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US crude oil

On April 6–13, 2018, US crude oil May futures rose 8.6%—the largest weekly gain since July 28, 2017. On April 13, 2018, US crude oil May futures settled at $67.39 per barrel—the highest closing level for US crude oil active futures in more than three years.

Last week, US crude oil tracking ETFs had the following returns:

  • The United States Oil ETF (USO) rose 8.3%.
  • The United States 12 Month Oil ETF (USL) rose 6.4%.
  • The PowerShares DB Oil ETF (DBO) rose 5.7%.

During this period, the US dollar fell 0.3%. The PowerShares DB US Dollar Bullish ETF (UUP), which tracks the US dollar, fell 0.4% in the week ending April 13, 2018. The fall in the US dollar could be positive for oil prices.

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IEA’s report

The IEA’s (International Energy Agency) Oil Market report was released on April 13, 2018. Based on the report, OECD (Organisation for Economic Cooperation and Development) commercial stocks could be at their five-year average by May 2018. In February 2018, OECD commercial stocks were just 30 million barrels more than their five-year average. US crude oil inventories are already below their five-year average. The US is a member of OECD and the largest oil consumer in the world.

The constraint in the US pipeline capacity could be a bottleneck for US crude oil output. The difference between WTI (West Texas Intermediate) Houston and WTI Midland prices has expanded close to $9 per barrel—a record level based on the IEA’s report. Houston is the export point, while WTI Midland represents the price of crude oil produced in the Permian Basin.

For 2018, the IEA’s estimates suggest that oil’s demand will outpace the supply—a bullish factor for oil prices. These bullish factors could help US crude oil move above the $70 level.

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Geopolitical factors

The US, the United Kingdom, and France carried out missile strikes on Syria on April 14. Concerns surrounding the strikes pushed oil higher last week. US crude oil May futures rose 8.6% in the week ending April 13.

On April 16, 2018, at 5:08 AM EST, US crude oil May futures were ~1.7% below their closing price on April 13, 2018.

Natural gas

On April 6–13, 2018, natural gas May futures rose 1.3% and settled at $2.74 per million British thermal units on April 13, 2018. The EIA’s inventory data helped natural gas prices increase. In the week ending April 13, 2018, the United States Natural Gas (UNG) rose 1.5%. However, natural gas bulls should be careful near the $2.76 level this week.

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