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Crude oil futures finished little changed this week as the boost from a surprisingly large drawdown in U.S. crude inventories was offset by concerns about demand and an easing geopolitical risk premium.
Friday’s U.S. consumer sentiment report was the latest data to “offer a whiff of stagflation,” Sevens Report Research co-editor Tyler Richey tells Marketwatch, and “risk assets didn’t like that,” as oil prices fell to session lows after the release.
The University of Michigan’s gauge of consumer sentiment tumbled to 67.4 in a preliminary May reading, down from 77.2 in April and well below economists’ expectations.
Also, Dallas Federal Reserve President Lorie Logan said it is too soon to cut interest rates, and it is unclear whether monetary policy is tight enough to bring down inflation to the Fed’s 2% goal.
Front-month Nymex crude (CL1:COM) for June delivery closed +0.2% on the week to $78.26/bbl, while front-month July Brent crude (CO1:COM) finished -0.2% this week to $82.79/bbl, its lowest settlement value since March 12; on Friday, Nymex crude fell 1.2% and Brent shed 1.3%.
U.S. natural gas (NG1:COM) added to its recent rally this week, with front-month June Nymex gas +5.1% to $2.252/MMBtu, despite Friday’s 2.1% decline; natgas futures have surged 43% from a 52-week low of $1.575 on March 26, lifting prices close to breakeven from a year ago.
ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI), (UNG), (BOIL), (KOLD), (UNL), (FCG)
OPEC+ is widely expected to extend production cuts beyond June into the second half of the year, but some uncertainty may be creeping into the market.
“The fall in prices is making it increasingly difficult for the OPEC+ states to allow the voluntary production cuts to be phased out at the end of June, as currently planned,” Commerzbank Research analysts say.
But Joe Maher of Capital Economics tells Dow Jones that “no decision has yet been made but we think it is likely to be a close call when the group meets on June 1… “It is still our view that OPEC+ oil supply will slowly rise in the second half of 2024 and in 2025.”
The market will be watching closely for OPEC and IEA demand estimates in their monthly reports due Tuesday and Wednesday, Maher says.
The energy sector, as indicated by the Energy Select Sector SPDR ETF (XLE), ended the week +1.3%.
Top 10 gainers in energy and natural resources in the past 5 days: Idaho Strategic Resources (IDR) +25.9%, Endeavour Silver (EXK) +25.3%, Ameresco (AMRC) +23.2%, Hallador Energy (HNRG) +21.3%, Iamgold (IAG) +19.8%, Intrepid Potash (IPI) +18.7%, Montauk Renewables (MNTK) +17.3%, Brenmiller Energy (BNRG) +15.6%, Kinross Gold (KGC) +15.1%, Crescent Energy (CRGY) +15%.
Top 5 decliners in energy and natural resources in the past 5 days: Meta Materials (MMAT) -38.8%, Flux Power (FLUX) -30.3%, Fluence Energy (FLNC) -19.5%, Braskem (BAK) -18.5%, KLX Energy Services (KLXE) -17.3%.
Source: Barchart.com
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