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Oil Prices: Analyzing the Key Drivers

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May. 21 2019, Published 8:15 a.m. ET

US crude oil

On May 20, US crude oil prices rose 0.5% and settled at $63.21 per barrel. The level is ~4.7% below the highest closing level for active US crude oil futures since October 31, 2018.

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Key drivers for oil prices

Trade war tensions have limited oil prices’ upside despite rising geopolitical tension in the Middle East. The S&P 500 Index (SPY) has fallen ~3.6% from its highest closing level in May. This week, US crude oil inventories are expected to decline. A Reuters poll suggests a fall of 3 million barrels in the API’s US crude oil inventories, which will likely ease the trade war pressure on oil prices.

In March, Saudi Arabia exported 7.14 MMbpd (million barrels of oil per day)—a gain of 0.16 MMbpd on a month-over-month basis. Since the US ended waivers for Iranian oil buyers this month, Saudi Arabian oil exports will likely rise more. A gain in Saudi Arabia’s market share due to the cost of Iranian oil exports could make the diplomatic rift worse between the two countries.

On May 20, US crude oil prices were 0.1%, 2.2%, 4.1% and 10.3% above their 20 50, 100, and 200-day moving averages, respectively. On May 8, the 50-day moving average moved above the 200-day moving average for the first time since October 23. A short-term moving average crossing above the long-term moving average is called a “golden cross.” The golden cross indicates bullishness.

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