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US Crude Oil above $70: Is More Upside Coming?

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Dec. 4 2020, Updated 10:53 a.m. ET

US crude oil

On May 7, US crude oil June futures rose 1.4% and settled at $70.73 per barrel—the highest closing level for US crude oil active futures since November 26, 2014. Since the deadline for the US to reconsider its position in the Iran nuclear deal is getting close, the geopolitical premium could be pushing oil higher. President Trump has said he will announce his decision today.

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Energy stocks and energy ETFs

On May 7, Callon Petroleum (CPE), Diamondback Energy (FANG), and RSP Permian (RSPP) rose 2.4%, 2.3%, and 2%, respectively—the largest gainers on our list of oil-weighted stocks.

On the same date, the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and the Energy Select Sector SPDR ETF (XLE), which hold energy stocks, rose 0.6% and 0.1%.

More upside in oil?

Based on the S&P Global Platts survey released on May 4, OPEC’s crude oil production in April could be ~32 MMbpd (million barrels per day)—a fall of 0.14 MMbpd from March and the lowest level in the past year. Based on the report, Venezuela’s oil output could be at a 30-year low in April—a bullish development for oil prices. OPEC‘s “Monthly Oil Market Report” for April is scheduled to be released on May 14.

On May 7, the difference between Brent crude oil July futures and WTI (West Texas Intermediate) crude oil June futures widened by $0.29 per barrel—the first expansion in the Brent-WTI spread since April 30.

In Part 4 of this series, we’ll discuss how the Brent-WTI spread impacts US crude oil exports. Next, we’ll discuss US crude oil production.

Moving averages

On May 7, US crude oil active futures were 4.7%, 9.3%, 11.9%, and 23.3% above their 20, 50, 100, and 200-day moving averages, respectively. US crude oil active futures trading above all of these moving averages across various timeframes is a bullish signal for prices.

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