US crude oil last week
Last week, US crude oil August futures rose 8.8%—the highest weekly gain for active US crude oil futures since December 2, 2016. US crude oil August futures closed at $57.43 per barrel on June 21. The S&P 500 Index (SPY) rose 2.2% last week. The gain oil prices might have helped SPY close higher last week. Energy stocks account for 5.2% of the S&P 500.
Another cut in OPEC’s meeting?
Based on the CME’s OPEC Meeting Outcome Probability tool, for the meeting on July 1-2, there’s a 62.7% chance that OPEC might deepen the oil output cut, which might help oil extend its gains. However, there’s a 36.8% chance that the current production cut rate will be extended.
Last week, the US and Iran were on the brink of war—the most important factor behind the rise in oil prices. On June 21, the Brent-WTI spread fell to the lowest level since April 16. The fall might indicate that the oil market is less concerned about a supply shock. The fall in US oil and gasoline inventories could also be behind the contraction in the spread.
In the week ending June 21, the United States Brent Oil Fund LP (BNO) rose 1.8%—3.7 percentage points less than the rise in the United States Oil Fund LP (USO). USO tracks US or WTI crude oil futures, while BNO tracks Brent crude oil futures.
This week, the closing level of $59.21 per barrel will be important for oil traders on the upside. Another fall in the US crude oil inventories spread might push prices above the psychologically important level of $60. The inventories spread is the difference between US crude oil inventories and their five-year average.