Energy (NYSEARCA:XLE) slumped near the bottom of the week’s S&P sector standings, as crude oil prices posted their largest one-week percentage loss in nearly two years.
The volatile week left front-month crude plunging 12.8% for U.S. WTI (CL1:COM) to $99.27/bbl and 11.1% for Brent (CO1:COM) to $104.39/bbl, the biggest weekly percentage declines for both benchmarks since late April 2020.
President Biden said on Thursday that the U.S. would release 180M barrels from the Strategic Petroleum Reserve over the next six months in the largest release in SPR history, while threatening to impose penalties on domestic drillers for failing to use federal oil permits.
The SPR move “may halt oil prices from skyrocketing to $150-plus” and in the short term will weigh on prices, Spartan’s Peter Cardillo told the Wall Street Journal. “However with war still in course and Putin demanding to be paid in rubles… it’s not going to crush the price of oil.”
Cardillo warns the move could also push the U.S. further away from oil independence: “You’ll have to replace that oil and if you don’t increase production you’ll have to import.”
Meanwhile, OPEC+ said it would stick with plans for an increase of 432K bbl/day to its May production target despite Western pressure to add more.
“The looming flood of U.S. barrels does not change the fact that the market will struggle to find enough supply in the coming months,” PVM analyst Stephen Brennock said. “The U.S. release pales in comparison to expectations that 3M bbl/day of Russian oil will be shut in as sanctions bite and buyers spurn purchases.”
Regarding the president’s “use-it-or-lose-it policy” on oil leases, it is “more about political scapegoating and finger pointing rather than resolving the underlying issues of supply and demand imbalances,” according to American Exploration & Production Council CEO Anne Bradbury.
“A more constructive approach would be to incentivize domestic oil production over the long term,” Bradbury said.
The week’s top 10 gainers in energy and natural resources: NASDAQ:HYMC +68.7%, TMC +59.1%, TISI +47.8%, LITM +35.6%, NFE +17.8%, BORR +17.4%, HMLP +16.8%, PLM +16.1%, NAT +15.3%, LAC +12.9%.
The week’s top 5 decliners in energy and natural resources: NYSE:HUSA -34.6%, ENSV -31.9%, MARPS -22.2%, USEG -18.4%, KLXE -18.2%.