Why Oil Bulls Might Corner the Bears



US crude oil last week

On February 22–March 1, US crude oil April futures fell 2.5% and closed at $55.8 per barrel. In the past week, profit-booking might have dragged oil prices from the second-highest closing level for active US crude oil futures since November 12. The difference between oil inventories and their five-year average fell 3% for the week ending February 22, which might be important for oil prices.

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Why oil bulls might corner the bears?

On March 4 at 6:00 AM EST, US crude oil prices have risen more than 50 cents from the closing level last week. Oil prices rose due to market optimism about the US-China trade talks. Based on a Reuters survey, OPEC’s supply fell to a four-year low last month. Next week, OPEC is scheduled to release its Monthly Oil Market Report. On March 3, Barclays said that OPEC’s exports have fallen by 1.5 MMbpd (million barrels per day) since November—0.7 MMbpd more than OPEC’s pledged cuts.

Analysts at Fitch Solutions expect Brent crude oil prices to average $73 per barrel in 2019. Based on a research note released on February 25, Goldman Sachs (GS) is mildly bullish on oil prices on a near-term basis. The fall in the global oil supply impacted the bullishness. Goldman Sachs expects Brent crude oil to trade between $70 and $75 this year.

On the upside, $59.41 could be an important level for US crude oil until March 8. Next, we’ll compare US equity indexes’ performance to oil prices. In Part 5, we’ll discuss the events that might be important for oil prices this week. The sentiments across US crude oil prices and the S&P 500 Index (SPY) are often interrelated.

Any rise in oil could boost upstream stocks like ConocoPhillips (COP), Hess (HES), and Chesapeake Energy (CHK). Last week, Brent crude oil futures underperformed US crude oil’s fall by 70 basis points. The Brent-WTI spread fell by $0.7. The fall in US crude oil production might have limited WTI crude oil’s decline compared to Brent crude oil prices.


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