Oil outperformed SPY
On June 24, US crude oil prices rose 0.8% and settled at $57.9 per barrel. In the trailing week, US crude oil prices rose 11%. On June 17–24, the S&P 500 Index (SPY) rose 1.9%. The bullishness in oil might have helped the upside in SPY. Energy stocks account for ~5.2% of SPY.
Will oil continue to outperform?
On July 1–2, OPEC and its allies, also referred to as “OPEC plus,” are scheduled to meet in Vienna to decide about another production cut extension. As of June 25 at 6:11 AM ET, based on the CME’s OPEC Meeting Outcome Probability tool, there’s a 68.5% chance that OPEC might deepen the oil output cut. The probability has risen from the previous day. The increase might help oil outperform until OPEC’s announcement.
However, US-Iran tension could escalate due to the current circumstances. President Trump’s decision to impose sanctions on Iran could make the situation deteriorate more. Analysts think that there’s a smaller chance of a war between the US and Iran. However, the diplomatic fight between the two countries might continue to support oil even after OPEC’s meeting.
On June 24, US crude oil prices were 1.1%, 2%, and 2.7% below their 20-day, 50-day, and 200-day moving averages, respectively. In the last few trading sessions, active futures prices have converged towards these key moving averages. This week, the EIA inventory data will likely be important for prices to break above these key moving averages.