Will Oil Shift to a Higher Gear?

Will Oil Shift to a Higher Gear? ## Oil prices On January 7, US crude oil February futures rose 1.2% and settled at $48.52 per barrel—the highest closing level for active US crude oil futures since December 17. The Energy Select Sector SPDR ETF (XLE) rose 1.5% on the same day. Until January 11, the closing level of $50.26 would be important for US crude oil. ## Will oil shift to a higher gear? The S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) rose 0.7% and 0.4%, respectively, on January 7. The recovery in equity indexes might have helped US crude oil to rise 6.8% in the trailing week. In the last month, equity indexes’ decline has made oil’s decline sharper. Another rise in US equity indexes, with the ongoing dialogue between the US and China about the trade war, might help oil shift to a higher gear. On the supply side, OPEC’s supply cuts in 2019 might be a turning point for oil prices. The fall in Iran and Venezuela’s oil exports along with the sign of a slowdown in US oil production growth might support oil. However, the inventory at 8% above the five-year average with no sign of a reduction from this level anytime soon could still be a problem for oil prices, which we’ll discuss in Part 3. ## US crude oil is below key moving averages On January 7, US crude oil futures were 10.5%, 22%, and 25.6% below their 50-day, 100-day, and 200-day moving averages, respectively. On the same day, US crude oil prices moved above their 20-day moving average—the first time since October 11. US crude oil prices being above the short-term moving averages indicates short-term momentum in oil. US crude oil futures’ 50-day moving average fell below the 200-day moving average on November 26. Since then, the difference has been widening. In technical terms, the crossover is called a “death cross.” Usually, the crossover is followed by more weakness. The crossover might pressure oil prices. Continue to Next Part Browse this series on Market Realist: * Part 2 - US Oil Production Growth Might Be Slower in 2019 * Part 3 - Falling Inventories Didn’t Help Oil’s Rise * Part 4 - Futures Spread: Less Bearish Sentiments for Oil?