Reversal in Oil Prices: Why Oil Bulls Should Remain Alert
US crude oil
On March 2–9, 2018, US crude oil April futures rose 1.3% and settled at $62.04 per barrel on March 9, 2018. US crude oil prices might face resistance after this closing level. Oil bulls should stay cautious about rising US crude oil production and increasing US oil exports.
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In the week ending March 2, 2018, US crude oil exports were ~1.5 MMbpd (million barrels per day). On a year-over-year basis, US crude oil exports were 0.6 MMbpd higher. Since OPEC implemented the production cut deal in January 2017, US crude oil exports have risen by 0.77 MMbpd. The rise is 64.3% of OPEC’s promised output cut—a factor that could hamper OPEC’s market share and endanger a continuation of OPEC and non-OPEC’s production cut in 2019.
In the week ending March 9, 2018, various assets like equity, crude oil, gold, and others moved higher. The recovery in oil prices last week could be due to bullish sentiments across the markets. The oil rig count declined by four to 796—the first fall after five weeks.
Below are the price performances of the US crude oil tracking ETFs last week:
- the United States Oil ETF (USO) at 0.8%
- the United States 12 Month Oil ETF (USL) at 1.5%
- the PowerShares DB Oil ETF (DBO) at 1.3%
On March 2–9, 2018, natural gas April futures were 1.4% higher and settled at $2.73 per million British thermal units on March 9, 2018. However, inventory data could be behind natural gas prices’ lower closing in the last two trading sessions. The inventory data could infuse more weakness into natural gas prices this week.