Energy was easily the week’s worst performing industry sector, falling alongside crude oil prices weighed by rising U.S. inventories and fading optimism over the global demand outlook.
Crude stockpiles normally decline at this time of the year, but the U.S. oil market was amply supplied in January, with the inventory build since the beginning of the year totaling 32M barrels and gasoline stocks rising for four straight weeks by a combined 12M barrels.
The latest U.S. data showed a 4.1M-barrel increase in crude inventories for the week ended January 27, as well as weekly increases for gasoline and distillate supplies.
For the week, front-month Nymex crude (CL1:COM) for March delivery settled -7.9% to $73.39/bbl, and April Brent crude (CO1:COM) closed -7.5% to $79.94/bbl the second straight weekly loss for both benchmarks after back-to-back weekly gains.
Starting February 5, the European Union and the U.K. will bar imports of Russian fuels such as diesel and gasoline, a move that follows a ban on Russian crude imports in December.
The European Union agreed Friday to cap the sales price of premium Russian petroleum products such as diesel at $100/bbl and limit lower-value products such as fuel oil at $45/bbl.
“Just like with the Russian crude sanctions, the EU ban on Russian oil products is unlikely to take barrels off the market,” merely causing changes in global flows, “hence it will have a muted impact,” Kpler lead oil analyst Matt Smith told MarketWatch.
The top oil and gas ETF – the Energy Select Sector SPDR Fund (NYSEARCA:XLE) – closed the week -5.9%, worst among the S&P’s 11 sector groups.
Top 10 decliners in energy and natural resources during the past 5 days: (VOC) -22.4%, (USAU) -15.5%, (MMLP) -14.3%, (BPT) -12.9%, (MVO) -12.7%, (COP) -12.5%, (SILV) -12.3%, (AMPY) -12.2%, (HES) -11.9%, (GPRK) -11.9%.