BNO - Recession fears central bank rate hikes sent crude oil reeling this week

2023-06-23 20:00:16 ET

Crude oil suffered its biggest weekly decline since early May following a flurry of central bank interest rate increases around the world and as the Federal Reserve signaled more potential rate hikes ahead, sparking fears of a global economic downturn.

There were signs this week that central bank action is finally cooling the economy, as business activity in Europe slowed sharply in June and slipped in the U.S. but less dramatically than in other parts of the world.

Meanwhile, China's promising economic recovery has faltered with several months of softer than expected consumption, production and property market data.

Recession and demand worries outweighed signs of supply-side tightness, as this week's U.S. inventory report showed crude stocks posted a surprise decline of 3.8M barrels.

Also, the number of U.S. oil rigs fell by 6 last week to 546, its lowest level since April 2022.

Front-month Nymex crude ( CL1:COM ) for August delivery ended the week -3.8% to $69.16/bbl, and August Brent crude ( CO1:COM ) closed -3.6% for the week to $73.85/bbl; the benchmarks are down 38% and 37%, respectively, from the end of June a year ago.

ETFs: ( NYSEARCA: USO ), ( BNO ), ( UCO ), ( SCO ), ( DBO ), ( USL ), ( DRIP ), ( GUSH ), ( USOI ), ( NRGU )

WTI futures have dropped below $70/bbl four times this year with increasing frequency, but each time technical support has held at $67-$69 , Sevens Report Research said, also noting each subsequent price bounce has run out of steam at a lower price point.

Energy stocks ( NYSEARCA: XLE ) ranked second from the bottom in the week's S&P sector standings, -4.3% .

Top 5 gainers in energy and natural resources during the past 5 days: ( AREC ) +15.3% , ( YPF ) +9.9% , ( PAM ) +9.6% , ( PPSI ) +9.5% , ( EOSE ) +9% .

Top 10 decliners in energy and natural resources during the past 5 days: ( IMPP ) -21.7% , ( TPIC ) -21% , ( HPK ) -20.5% , ( FCEL ) -19.2% , ( STEM ) -18.7% , ( AMTX ) -18.3% , ( CTGO ) -17.7% , ( SJT ) -17.5% , ( NRGV ) -16.4% , ( PLUG ) -14.9% .

Source: Barchart.com

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