Crude oil futures fell for the third straight week, which started with a selloff sparked by OPEC+’s decision to unwind 2.2M bbl/day in voluntary production cuts later this year gradually bring some barrels back into the market later this year.
Attempting to stem the selloff, Saudi Arabia’s energy minister said the OPEC+ plan to gradually bring back some barrels into the market could be paused or reversed.
But the Saudis cut the price for its flagship Arab Light crude to Asian customers after three straight monthly raises, an apparent indication of demand uncertainties.
Oil bounced on Thursday on fresh hopes for interest rate cuts in the U.S. after the European Central Bank cut rates for the first time since 2019, but the rebound ran out of steam Friday following a much bigger than expected increase in May U.S. payrolls.
The strong jobs report could push back expectations for when the Federal Reserve starts lowering interest rates.
All else being equal, “lower rates are nominally bullish for equity and commodity prices, suggesting that if rate cut timetables continue to be pushed back, it could weigh on crude prices ahead,” Schneider Electric’s Robbie Fraser wrote, according to Marketwatch.
Also this week, the U.S. reported bearish data for oil, as domestic commercial crude stocks rose by 1.2M barrels in the week ended May 31, vs. expectations of a 1.6M decline, while gasoline and distillate inventories rose, adding to concerns over the demand outlook.
On Friday, Baker Hughes said the U.S. active oil rig count, an early indicator of future output, fell to its lowest level since January 2022.
Also on Friday, the U.S. Department of Energy announced plans to buy another 6M barrels of oil to replenish the Strategic Petroleum Reserve.
Front-month Nymex crude (CL1:COM) for July delivery ended the week -1.9% to $75.53/bbl, and front-month August Brent crude (CO1:COM) closed -1.8% for the week to $79.62/bbl; on Friday, WTI crude finished flat and Brent fell 0.3%.
Meanwhile, front-month July Nymex natural gas (NG1:COM) jumped this week, +12.8% to $2.918/MMBtu, as hot weather drove up power sector demand as well as the prospect of a reduced inventory surplus.
ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI), (UNG), (BOIL), (KOLD), (UNL), (FCG)
Hedge funds dumped their bullish bets on Brent crude and ramped up shorts this week, sending positions to the least bullish in nearly a decade, following the OPEC+ decision, Bloomberg reported.
Money managers’ net-long position on Brent crude shrank by 102,075 lots to a total of 45,678 lots in data through Tuesday, the lowest level for net-longs since September 2014, according to weekly ICE Futures Europe data.
OPEC+ ministers tried to reassure the markets that their plan was subject to adjustments depending on market conditions, which helped oil trim its losses for the week and perhaps reversing money managers’ positions in next week’s data.
The energy sector, as indicated by the Energy Select Sector SPDR ETF (NYSEARCA:XLE), was one of the week’s two worst performers, -3.2%.
Top 5 gainers in energy and natural resources in the past 5 days: Flotek Industries (FTK) +16.6%, Westport Fuel Systems (WPRT) +15.7%, Knot Offshore Partners (KNOP) +12.7%, Osisko Development (ODV) +8.9%, NextDecade (NEXT) +8.8%.
Top 10 decliners in energy and natural resources in the past 5 days: ASP Isotopes (ASPI) -21.5%, Fortuna Silver Mines (FSM) -20.3%, Ivanhoe Electric (IE) -19.9%, enCore Energy (EU) -15.2%, Energy Fuels (UUUU) -15.1%, Uranium Energy (UEC) -14.3%, Vistra Energy (VST) -14.1%, Taseko Mines (TGB) -14.1%, YPF (YPF) -13.7%, Transportadora de Gas del Sur (TGS) -13.7%.
Source: Barchart.com
