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How the Oil Market Is Reacting to Recent Events


Jun. 17 2019, Updated 7:31 a.m. ET

US crude oil last week

Last week, US crude oil July futures fell 2.7% and closed at $52.51 per barrel on June 14. On June 5, US crude oil prices fell to their lowest closing level of $51.68 per barrel since January 14. The S&P 500 Index (SPY) rose 0.5% last week. However, the rise in the broader market was little help for oil as supply concerns pressured prices.

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Oil on June 17

At 5:54 AM ET on June 17, US crude oil prices were down 0.6% from their closing level last week. On June 13, after the tanker explosion in the Middle East, oil prices and implied volatility both rose. Usually, higher implied volatility wouldn’t support a rise in oil prices. However, the rising tension in the Middle East has impacted the WTI-Brent spread,  which expanded last week. So, supply concerns are supporting Brent more than WTI grades of oil.

Last week, the United States Brent Oil Fund LP (BNO), which tracks Brent crude oil futures fell 1.8%, 80 basis points less than the fall in the United States Oil Fund LP (USO). USO tracks US or WTI crude oil futures. Moreover, the IEA trimming its oil demand growth estimate for the second time in a row is another factor that might kill any upside in oil prices.

This week, the closing level of $54.81 per barrel will be important for oil traders on the upside. However, any rise in the US crude oil inventories spread might push prices close to $49.75 per barrel. The inventories spread is the difference between US crude oil inventories and their five-year average.


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