Oil dragged energy stocks lower
On May 30, US crude oil July futures fell 3.8% and settled at $56.59 per barrel—the lowest closing level for active US crude oil futures since March 8. A 0.3% rise in the S&P 500 Index (SPY) didn’t support oil prices. In the trailing week, US crude oil active futures fell 2.3%. On average, our list of oil-weighted stocks fell 2.6%. Callon Petroleum (CPE) and Carrizo Oil & Gas (CRZO) fell 8% and 6.6%. They were the underperformers among oil-weighted stocks.
Second-highest weekly loss in 2019
At 6:12 AM EST on May 31, US crude oil active futures were at $55.31, which is ~5.7% below the closing level the previous week. If US crude oil prices remain at those levels on May 31, then it would be the second-highest weekly decline for US crude oil futures since the week ending December 21.
Why are oil prices declining?
On May 30, the EIA reported a decline of 0.3 MMbbls (million barrels)—smaller than Reuters’ expectation of a decline of 0.857 MMbbls. With the small decline, the US crude oil inventories spread has expanded by one percentage point to 5%—a negative development for oil prices. The inventories spread is the difference between oil inventories and their five-year average. US crude oil production is also back to its record level for the week ending May 24.
Rising US crude oil supplies with the IEA trimming the oil demand forecast by 400 Mbpd (thousand barrels per day) in the first quarter and 100 Mbpd for the remaining quarters in 2019 increased the bearish sentiment for oil prices. Trade war concerns could be making oil fall sharper. Oil is a growth-driven asset.