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Crude oil futures settle lower on the day while notching a fourth straight weekly increase, helped by a much larger than expected drop in U.S. crude inventories, renewed hopes that the U.S. Federal Reserve might start cutting interest rates soon, and heightened geopolitical risks in the Middle East.
The U.S. Energy Information Administration’s weekly report showed across-the-board draws in crude and refined product inventories, a bullish 12.2M-barrel decline in stockpiles, a 2.2M-barrel drop in gasoline inventories and a 1.5M-barrel drop in distillate supplies.
Various data during the week raised hopes for a September interest rate cut by the U.S. Federal Reserve, and Fed Chairman Jerome Powell offered relatively dovish comments at the European Central Bank conference, acknowledging that inflation finally seems to moving in the right direction.
On the supply side, Hurricane Beryl hit Mexico’s Yucatan peninsula and is expected to make a second landfall between Mexico and Texas next week after crossing the Gulf of Mexico; several oil companies evacuated some staff from offshore platforms, but they do not expect a significant impact on production.
Also, tensions rose between Israel and Hezbollah during the week, with the Iran-backed militia group firing hundreds of rockets at Israeli targets in retaliation for the killing of a high-ranking commander this week, but efforts to secure a ceasefire and hostage release deal in Gaza appeared to gain momentum on Friday.
Front-month Nymex crude (CL1:COM) for August delivery ended the week +2% to $83.16/bbl, including a 0.8% slide on Friday, while front-month September Brent crude (CO1:COM) closed the week +1.8% to $86.54/bbl, including Friday’s 1% drop.
While crude oil price have gained for four straight weeks, U.S. natural gas has declined for the same period, with front-month August Nymex gas settled -10.8% to $2.319/MMBtu, including a 4.1% drop on Friday to its lowest settlement value since May 10.
ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI), (UNG), (BOIL), (KOLD), (UNL), (FCG)
Meanwhile, Saudi Arabia cut the price of all crude grades it sells to Asia, lowering the official selling price for August loadings of its flagship Arab Light $0.60-$1.80/bbl over the Oman-Dubai average, a move that underscores the pressure faced by OPEC producers by strong non-OPEC supply growth.
However, the Arab Light price cut was less significant than expected, according to DNB Markets, which said traders and refineries expected a $0.90/bbl reduction.
The energy sector, represented by the Energy Select Sector SPDR Fund ETF (XLE), was the shortened week’s worst performer, finishing -1.1%.
The 10 gainers in energy and natural resources in the past 5 days: Nano Nuclear Energy (NNE) +75.1%, Skeena Resources (SKE) +29%, Century Aluminum (CENX) +26.7%, Ramaco Resources (METC) +18.3%, Idaho Strategic Resources (IDR) +17%, Metals Acquisition (MTAL) +16%, Warrior Met Coal (METC) +15.7%, Anglogold Ashanti (AU) +15.4%, U.S. Gold (USAU) +14.4%, Sibanye-Stillwater (SBSW) +14.2%.
Top 5 decliners in energy and natural resources in the past 5 days: TPI Composites (TPIC) -18.2%, Critical Metals (CRML) -15.8%, Clean Energy Fuels (CLNE) -14.5%, Green Plains (GPRE) -13.3%, Fluence Energy (FLNC) -13.3%.
Source: Barchart.com