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Oil Prices: Why ‘March’ Could Be Important

Rabindra Samanta - Author
By

Nov. 20 2020, Updated 2:54 p.m. ET

US crude oil retained its gains

On February 28, US crude oil April futures rose 0.5% and settled at $57.22 per barrel—the second-highest closing level for active US crude oil futures since November 12. Optimism surrounding the trade talks might have been behind the increase in US crude oil. Bullish inventory data helped US crude oil prices to retain the gains.

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March could be important for oil prices

The only risk to oil prices is from US crude oil production, which made a record high of 12.1 million barrels per day last week. With the relationship between the oil rig count and oil prices, we might see a deceleration in the US oil production growth rate after March. Based on the EIA’s Monthly Crude Oil Production Report released on February 28, crude oil production in the United States has fallen 0.5% in December, the first time since May, on a month-over-month basis.

Any changes in US crude oil production would be important for oil prices. The oil supply outside the US is declining in 2019 due to OPEC’s production cut deal. Venezuela’s oil exports have fallen ~40% after a month of US sanctions based on a Reuters report.

The rise in equity indexes like the S&P 500 (SPY) might be another important factor for oil’s rise, which we’ll discuss in Part 3. Higher oil prices could be a positive development for upstream stocks like ConocoPhillips (COP), Chesapeake Energy (CHK), and Denbury Resources (DNR). In Part 4, we’ll discuss the important price levels for US crude oil next week.

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