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Will US Crude Oil Prices Surpass $54?


Nov. 20 2020, Updated 5:25 p.m. ET

$54—an important resistance level for US crude oil

On January 28, US crude oil hit an intraday high of $53.64. Over the last six trading sessions, US crude oil prices have struggled to surpass the $54 level. Since November 21, US crude oil active futures have failed to close above this level. In the last trading session, US crude oil prices fell 3.2% and closed at $51.99 per barrel. On the same day, both the S&P 500 Index (SPY) and the Dow Jones Industrial Average (DIA) fell 0.8%. Concerns surrounding US-China trade talks this week might have dragged oil prices and equity markets down. However, inventory data might push US crude oil above $54 this week, as we’ll discuss in Part 3 of this series.

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Venezuelan crisis failing to boost oil prices

Currently, oil traders might be more concerned about global economic growth than the ongoing political crisis in Venezuela. On January 28, the United States imposed sanctions on Venezuelan oil exports to the United States. The United States accounted for around 36% of Venezuela’s oil exports worldwide in 2017. Moreover, the Brent-WTI spread was almost unchanged on January 28. However, on January 29, at 5:48 AM ET, the spread advanced by 20 cents.

US crude oil and key moving averages

At 5:33 AM ET on January 29, US crude oil futures were trading 12.2% and 18.4% below their 100-day and 200-day moving averages, respectively. On the same day, US crude oil prices moved 3.7% and 3.3% above their 20-day and 50-day moving averages, respectively. US crude oil’s price hovering above these short-term moving averages indicates short-term momentum in oil. On the upside, $55.49 could be an important level for crude oil until February 1.

US crude oil futures’ 50-day moving average fell below the 200-day moving average on November 26. Since then, the difference has been widening. In technical terms, this crossover is called a “death cross,” and it could pressure oil prices. Usually, a crossover precedes more weakness. The above analysis could be important for oil-weighted stocks such as California Resources (CRC), Oasis Petroleum (OAS), and Whiting Petroleum (WLL).


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