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Has Oil Lost Its Uptrend?

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Apr. 16 2019, Published 8:55 a.m. ET

US crude oil

On April 15, US crude oil prices fell 0.8% and settled at $63.4 per barrel. Profit-booking and concerns about a possible extension of the OPEC and non-OPEC production cut into the second half of 2019 have dragged oil prices. OPEC and non-OPEC supply cuts impacted oil’s recent uptrend.

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Has oil lost its uptrend?

In the past three trading sessions, US crude oil prices didn’t close above the $64 level. On April 13, the Russian finance minister said that Russia and Saudi Arabia might increase their oil production to counter rising US oil supplies.

There’s growing restlessness among OPEC allies to extend the production cuts. If Russia withdraws from the second round of the production cuts, then OPEC might not able to push oil prices up more. OPEC and its allies are scheduled to meet on June 25. If Saudi Arabia doesn’t bolster market confidence for a second round in the production cuts, oil prices might lose the uptrend.

Key technical levels

At 4:28 AM EST on April 16, US crude oil prices are almost unchanged. Crude oil prices are 3%, 9.1%, 16.6%, and 3.2% above their 20, 50, 100, and 200-day moving averages, respectively. Prices above these moving averages indicate bullishness for oil. However, prices are converging towards their 20-day moving average—a concern for oil’s uptrend.

The S&P 500 Index (SPY), the Dow Jones Industrial Average (DIA), and the S&P Mid-Cap 400 (IVOO) might be impacted by any short-term changes in oil prices due to their exposure to the energy sector. Upstream energy stocks like ConocoPhillips (COP), Chesapeake Energy (CHK), and Occidental Petroleum (OXY) will likely be impacted by any change in oil prices.

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