Oil and gas stocks concluded their worst week since March 2020, amid fears that interest rate hikes from various central banks around the world could slow global demand.
U.S. crude oil futures (CL1:COM) plunged 6.8% on Friday to close at $109.56/bbl in the biggest one-session drop since March 31, capping a 9.2% loss for the week, Brent crude futures (CO1:COM) fell 5.6% on Friday and 7.3% for the week to settle at $113.12/bbl, and Nymex RBOB gasoline (XB1:COM) slid 9.1% to $3.793/gal this week on concerns that high pump prices eventually will choke demand.
U.S. natural gas (NG1:COM) sank 21.5% for the week, including 7% on Friday, to $6.944/MMBtu, closing below $7 for the first time since late April, after the Freeport LNG facility shut down due to a fire, which will severely slow U.S. export capacity at a time of rising demand in Europe.
Once the current move lower has completed, Oanda’s Edward Moya thinks “oil should stabilize and trade comfortably above the US$100/bbl level as potential disruptions from either further sanctions on Russia oil or hurricane season will keep supplies at dangerously low levels.”
The Select Sector SPDR Energy ETF (NYSEARCA:XLE) fell by more than 5% for the week, with some analysts saying institutional investors may be selling out of profitable energy trades to cover losses elsewhere.
“Selling the strongest [group] is typical of the late-stage phase of the selloff,” said Lorenzo Di Mattia, manager of the Sibilla Global Fund.
Nevertheless, U.S. crude oil is up 46% so far this year and the top energy ETF is 32% higher YTD.
Top 10 decliners in energy and natural resources for the week: (NYSE:WTI) -32.9%, (BOOM) -31.5%, (PVL) -30.8%, (PRT) -30.4%, (SJT) -29.5%, (CLMT) -29.4%, (LITM) -29.2%, (SD) -28.5%, (LPI) -27.4%, (NRT) -27.1%.