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Crude oil futures closed 2% lower Friday to end the week on a downbeat note, as “rate hike worries returned with a vengeance” following tough talk from two Federal Reserve officials who warned that further increases would be essential to curb inflation.
This week’s stronger than expected U.S. wholesale inflation data added to fears that the Fed may have to induce a recession to tame inflation.
The possibility of more aggressive rate hikes by the Fed also helped strengthen the dollar, with the ICE U.S. Dollar index trading 0.3% higher for the week.
The Energy Information Administration reported this week that U.S. commercial crude inventories spiked by 16.3M barrels for the week ended February 10, with supplies up for an eighth straight week.
The data “continues to suggest market’s face a near-term oversupply of crude as refiners have been slow to respond,” according to Schneider Electric’s Robbie Fraser.
Finally, the Biden administration said it would continue drawing down the U.S. Strategic Petroleum Reserve, releasing another 26M more barrels into the market.
Front-month Nymex crude (CL1:COM) for March delivery finished -4.2% this week to $76.34/bbl, and April Brent crude (CO1:COM) settled -3.9% to $83.00/bbl, the third decline in the past four weeks for both benchmarks.
U.S. Nymex natural gas (NG1:COM) for March delivery plunged -9.5% to $2.275/MMBtu, the lowest settlement value for the front-month contract since September 2020.
The S&P energy sector (NYSEARCA:XLE) was easily Friday’s weakest group and fell more than 6% this week, and is now down 6% for the month and 3.5% so far in Q1.
ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (DBO), (DRIP), (GUSH), (USOI), (NRGU)
Top 5 gainers in energy and natural resources during the past 5 days: (NYSE:NGL) +32.7%, (OPAL) +16%, (IE) +14.2%, (AZRE) +13.8%, (ARCH) +11.7%.
Top 19 decliners in energy and natural resources during the past 5 days: (DFLI) -26%, (DVN) -16%, (CPE) -13.6%, (DC) -13.5%, (NINE) -12.6%, (APA) -12.5%, (INDO) -11.9%, (EOG) -11.7%, (ROCC) -11.6%, (AR) -10.9%.
Source: Barchart.com