In the week that ended on November 8, WTI crude oil prices rose 1.9% and closed at $57.24 per barrel. Optimism surrounding a possible further production cut by OPEC-plus supported oil prices. However, oversupply concerns limited the upside.
This month so far, WTI crude oil active futures, or US crude oil active futures, have risen 5.6% as of November 8. The S&P 500 Index (SPY) has gained 1.8% in the period. The rise in the equity market is a positive development for oil prices. Oil is a growth-driven asset. In 2019 so far, the correlation between oil and the S&P 500 is 68.2%. Global economic growth affects oil’s demand.
Is Iran affecting Saudi Aramco’s IPO?
On November 10, Iranian President Hassan Rouhani announced the discovery of a new oilfield. According to him, the new oilfield will increase Iran’s oil reserve by 53 billion barrels, as per CNBC.
Coincidentally, the announcement came at a time when Saudi Arabia was gearing up for Saudi Aramco’s IPO. Saudi Arabia and Iran are rivals in the market. Both nations are engaged in proxy war in Syria and Yemen. In fact, the US accused Iran of the drone attack on Saudi Aramco’s oil facilities in September.
Bankers have valued Saudi Aramco at $1.3 trillion–$1.7 trillion, according to a Wall Street Journal report released on November 9. OPEC’s World Oil Outlook report has already highlighted new challenges for Middle Eastern oil producers. Read OPEC and EIA Bring No Relief for Crude Oil Prices to learn more.
Iran’s announcement of its oil discovery might adversely affect crude oil prices. Lower oil prices would negatively impact Saudi Aramco’s valuation. However, US sanctions have crippled Iran’s oil exports. A stake sale in Saudi Aramco will help Saudi Arabia invest in other sectors of the economy.
On November 8, US crude oil active futures settled 2.2%, 3.8%, and 3.1% above their 20-day, 100-day, and 200-day moving averages, respectively. However, on the same day, active crude oil futures settled on par with the 50-day moving average. Today, at 7:04 AM ET, WTI crude oil futures were trading 1.4% below their 50-day moving average. The 50-day moving average level of $57.24 will be an important resistance zone for US crude oil prices.
Moreover, if the American Petroleum Institute and the US Energy Information Administration release bullish inventory reports on November 13 and 14, US crude oil futures could move above the 50-day moving average level. The 20-day moving average level of $56 is also an important support zone for oil prices this week.
On November 8, WTI crude oil’s implied volatility was 29.1%. Based on this volatility figure, US crude oil active futures are expected to close between $55.29 and $59.19 per barrel. The timespan for this price range is November 11–15. The confidence level for this price range is 68% assuming that prices follow a normal distribution.