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Analysts Might Have Helped Oil’s Rise

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US equity indexes

On January 24–31, US equity indexes had the following correlations with US crude oil March futures:

  • the Dow Jones Industrial Average (DIA): 74.4%
  • the S&P 500 (SPY): 51.7%
  • the S&P Mid-Cap 400 (IVOO): 38.7%

These three equity indexes have exposure of ~5.2%, ~5.9%, and ~5.1% to the energy sector, respectively. The equity indexes rose 1.8%, 2.3%, and 2%, respectively, in the trailing week. US crude oil March futures rose 1.2% during this period.

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Oil’s rise and equity indexes

The correlations indicate a positive relationship between oil and these US equity indexes. Earnings data might have impacted the indexes’ moves. Oil prices might have been influenced by changes in the broader market. The factors that we discussed in Part 1 are also responsible for oil’s rise.

On January 24–31, the Energy Select Sector SPDR ETF (XLE) rose 2.6%—the sixth-largest rise among the SPDR ETFs that break the broad market into subsectors. The bullishness in US equity indexes might have been behind XLE’s rise, which we discussed in the previous part. During this period, the Real Estate Select Sector SPDR (XLRE) rose 4.8%. XLRE was the outperformer among sector-based SPDR ETFs. The Financial Select Sector SPDR ETF (XLF) rose 0.6%—the underperformer among sector-based SPDR ETFs.

Next, we’ll discuss the important price level for US crude oil next week.

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