Energy shares rise with oil futures as U.S. reserves sink to 35-year low (NYSEARCA:XLE)
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Shares of energy companies rose alongside oil futures this week, as investors shrugged off talk of a global economic slowdown and pivoted toward bullish issues such as low supplies of refined fuels in the U.S. and elsewhere.
June WTI crude oil (CL1:COM) scored its fourth straight weekly gain, +2.4% to $113.23/bbl, while U.S. natural gas futures (NG1:COM) rose for the third time in the last four weeks, above $8/MMBtu and within sight of multiyear highs.
“What remains true across global markets is that inventories are low, particularly for products,” Schneider Electric’s Robbie Fraser said, a challenge that is “likely to persist as northern hemisphere summer travel demand is poised for a boost to gasoline, diesel and jet fuel demand over the weeks and months ahead.”
The U.S. government’s strategic petroleum reserves have sunk to a 35-year-low 538M barrels, after the Biden administration began selling reserves last year in a mostly unsuccessful attempt to tamp down gasoline prices at the pump.
Phil Flynn of Price Futures Group worries the reserves are getting too low ahead of driving season – and hurricane season – telling The Wall Street Journal “it’s like burning out your bullpen early, using your relief pitcher in the second inning and your closer in the third,” also noting U.S. oil consumption is 20% higher than 1987 when reserves were this low.
Rebecca Babin, senior energy trader at CIBC Private Wealth Management, noted the “disconnect between the risk financial markets associate with crude financial assets and the physical market that’s trying to digest SPR releases to meet product demand. This dichotomy keeps markets fragmented and volatile… it could be a cruel summer for energy traders.”
The Energy Select Sector SPDR Fund (NYSEARCA:XLE), the top ETF in the group, edged 1.2% higher for the week, and still leads all S&P sectors with a 43% YTD gain.
The week’s top 10 gainers in energy and natural resources:(CNEY) +45.5%, (AMPS) +36.3%, (PBT) +24.8%, (MTR) +22.9%, (FLNC) +22.6%, (PRT) +19.2%, (TDW) +17.7%, (HTOO) +17.7%, (TNK) +17.4%, (BATL) +16.5%.
The week’s top 3 decliners in energy and natural resources: (HPK) -16.5%, (METC) -12.9%, (CDEV) -12.3%.
Source: Barchart.com
