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Can US Crude Oil’s Recovery Be Sustained?

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US crude oil

On June 11, US crude oil July futures rose 0.5% and settled at $66.10 per barrel. Between June 4 and June 11, US crude oil July futures rose 2.1%.

Energy stocks and ETFs

On June 11, Carrizo Oil & Gas (CRZO), WPX Energy (WPX), and Concho Resources (CXO) rose 3.0%, 1.6%, and 1.1%, respectively—the largest gainers on our list of oil-weighted stocks.

The iShares US Energy ETF (IYE) and the Energy Select Sector SPDR ETF (XLE), which hold energy stocks, rose 0.3% and 0.5%, respectively, on the same date.

Oil’s recovery

On June 6, US crude oil July futures closed at $64.73 per barrel—the lowest closing level for active US crude oil futures since April 9. Although prices have recovered to some extent since then, there are other factors to watch.

News reports suggest that in May, Saudi Arabia’s oil production increased by 162,000 barrels per day on a month-over-month basis to ~10.0 MMbpd (million barrels per day). Russian output was also reported to have exceeded its cap level in early June. 

US rigs continued to rise in the latest week even as US production was at a record high. On June 22, OPEC members and Russia are slated to discuss the fate of the production cut deal.

In Part 2 of this series, we’ll discuss rising oil rig counts. In Part 3, we’ll discuss the US oil inventory levels, which affect oil prices.

Will US crude oil’s recovery sustain?

On June 11, US crude oil active futures were 4.0% and 2.5% below their 20-day and 50-day moving averages, respectively. On the same date, US crude oil futures were 1.1% and 10.4% above their 100-day and 200-day moving averages, respectively.

US crude oil prices below these short-term moving averages could indicate short-term weakness in oil prices. However, the long-term 100-day and 200-day moving averages of $65.36 and $59.86, respectively, could act as strong support factors for oil.

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