IEZ - Crude oil tumbles as China's rate cuts fail to impress

2023-06-20 12:25:04 ET

Energy is Tuesday's worst performing S&P sector, -3.5% with losses in all 22 components, as WTI crude oil reversed overnight gains to drop as much as $2/bbl to slip below $70/bbl before rebounding slightly.

The weakness centers on worries about the strength of growth in China after the People's Bank of China cut two benchmark lending rates by 10 basis points each, which were smaller than the market had expected.

The rate reductions follow recent economic data that showed China's retail and factory sectors are struggling to sustain momentum from earlier this year, calling demand for energy related products into question.

On the supply side, Russia is set to increase seaborne diesel and gasoil exports this month, and Iran's crude exports and oil production have hit new highs this year despite U.S. sanctions.

WTI front-month crude oil ( CL1:COM ) for July delivery -2.2% to $70.21/bbl, while August Brent crude ( CO1:COM ) -1.3% at $75.06/bbl.

ETFs: ( NYSEARCA: XLE ), ( XOP ), ( VDE ), ( OIH ), ( XES ), ( IEZ ), ( NYSEARCA: USO ), ( BNO ), ( UCO ), ( SCO ), ( DBO ), ( USL ), ( DRIP ), ( GUSH ), ( USOI ), ( NRGU )

The oil and gas sector has given up ~5.5%% so far this quarter compared with a 6.5% Q2 gain in the broader S&P 500.

Six of the 15 biggest losers on the S&P 500 are in the oil and gas group: ( DVN ) -4.5% , ( MRO ) -4.1% , ( APA ) -3.9% , ( HAL ) -3.6% , ( EOG ) -3.6% , ( COP ) -3.5% .

More on crude oil:

• China Remains Major Driver Of Global Oil Demand Growth
• Geopolitical Risk Likely To Weigh On Crude Prices
• A Few Months Away From Potential Start Of Global Energy Crisis

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