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US Crude Oil Is 3.1% Away from a Bear Market

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US crude oil nearing a bear market

On November 5, US crude oil prices were 17.42% below the almost four-year highest closing level of $76.41 on October 3. A fall of another 3.1% from the last closing price would make US crude oil prices enter a bear market.

Since the end of September, portfolio managers’ net sell in crude oil and refined products totaled 371 million barrels. Portfolio managers have reduced their total net long positions in crude oil and refined products to the lowest level in the last 15 months in the week ending on October 30, according to a Reuters report.

On October 23, Saudi Arabia announced that it will keep on fulfilling its customers’ oil demand. Saudi Arabia’s announcement and US waivers on a temporary basis might have fueled the bearish sentiments for oil prices. On November 5, US sanctions on Iran came into force.

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US crude oil prices and the broader market

On November 5, US crude oil December futures fell 0.1% and settled at $63.1 per barrel—the lowest closing level for active US crude oil futures since April 6. The Energy Select Sector SPDR ETF (XLE) rose 1.7% on November 5. The S&P 500 (SPY) and the Dow Jones Industrial Average (DIA) rose 0.6% and 0.8%, respectively. The gains in the broader market might have supported energy stocks.

Moving averages

On November 5, US crude oil futures were 8.5%, 9.9%, 9.2%, and 6.5% below their 20-day, 50-day, 100-day, and 200-day moving averages, respectively. US crude oil prices below these key moving averages indicate a bearish sentiment for oil.

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