US crude oil prices
On September 13, US crude oil October futures fell 2.5% and settled at $68.59 per barrel. On the same day, the Energy Select Sector SPDR ETF (XLE) was unchanged. The S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) rose 0.5% and 0.6% on September 13. Mute energy stocks might have helped these indexes to rise. In Part 3 of this series, we’ll analyze US crude oil’s relationship with these equity indexes.
Oil traders might avoid short positions
Concerns surrounding the trade war’s impact on global economic growth and weaker emerging market currencies might curb the demand for oil—a bearish factor for oil prices. So far in 2018, the WisdomTree Emerging Currency Strategy Fund (CEW) has fallen 7.6%.
According to IEA data, the oil market was at a surplus of 0.27 MMbpd (million barrels per day) in the second quarter. The IEA estimates demand growth of 1.4 MMbpd and 1.5 MMbpd in 2018 and 2019, respectively. Based on Bloomberg data, Iran’s oil exports have fallen to 1.3 MMbpd in September compared to over 2 MMbpd last month. OPEC might struggle to bring 100% of its spare production capacity online. In the United States, crude oil production has plateaued in the range of 10.8 MMbpd–11 MMbpd since June. Besides these important points, any supply disruption due to Hurricane Florence could push oil higher.
These factors might increase the risk for short positions in the oil market. In part four of this series, we’ll discuss important price limits for US crude oil.
On September 13, natural gas October futures fell 0.4% to $2.817 per MMBtu (million British thermal units). On the same day, the EIA reported that natural gas inventories rose by 69 Bcf (billion cubic feet) last week. A Reuters poll suggested that inventories might rise by 68 Bcf for the same week. Natural gas prices and the United States Natural Gas ETF (UNG) rose 1.6% and 1.1%, respectively, in the trailing week.
On September 6–13, XLE rose 1.5%—the third-highest gainer among the SPDR ETFs that break the broad market into subsectors.
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