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Calm Down! Oil Prices Could Stay Range Bound


Nov. 20 2020, Updated 12:37 p.m. ET

US crude oil

On July 6–13, US crude oil August futures fell 3.8%. However, US crude oil prices gained 1% and closed at $71.01 per barrel on July 13. US crude oil active futures remained above the 20-day moving average. US crude oil active futures were 1% above the crucial short-term charting level on the same date.

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Oil prices may remain range bound

In the last 13 trading sessions, US crude oil prices closed in the range of $70–$74 per barrel. Market concerns surrounding a rise in Saudi Arabia and Russia’s oil output could limit the upside in oil prices. At the same time, fears of a sudden spike in oil prices due to an unplanned supply disruption could support oil prices. In the current week, oil traders will likely stay cautious around $72.6. On the downside, $68 would be an important price limit to watch until July 20.

Any possible upside in oil prices could be a positive development for investors in oil-weighted stocks beaten by oil’s fall. Diamondback Energy (FANG), Oasis Petroleum (OAS), and California Resources (CRC) fell 2.7%, 5%, and 9.3%, respectively, last week. They were the underperformers among oil-weighted stocks.

Natural gas

On July 6–13, natural gas August futures fell 3.7% and settled at $2.752 per million British thermal units on July 13—more than a two-month low. Supply concerns could have dragged natural gas prices last week. After two months, natural gas prices decisively broke below the 100-day moving average in the last trading session. On the downside, the closing level of $2.72 could be important for natural gas bears until July 20.

More downside in natural gas prices could cause more weakness in natural gas–weighted stocks like Chesapeake Energy (CHK) and Gulfport Energy (GPOR), which fell 1.9% and 8.6%, respectively, last week.


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