Oil pushed energy stocks higher
On May 16, US crude oil June futures rose 1.4% and settled at $62.87 per barrel. A 0.9% rise in the S&P 500 Index (SPY) and rising geopolitical tensions in the Middle East strengthened oil prices. In the trailing week, US crude oil active futures rose 1.9%. On average, our list of oil-weighted stocks rose 2.9%. California Resources (CRC) and Oasis Petroleum (OAS) rose 10.7% and 6%. They were the outperformers among oil-weighted stocks.
At 5:56 AM EST on May 17, US crude oil active futures were at $63.32, which is ~2.7% above the closing level the previous week. This week would be the first weekly gain for US crude oil since the week ending April 19. If US crude oil prices stay at those levels until the end of trading on May 17, it would be the highest weekly gain for US crude oil since early April.
US sanctions on Iran might have increased the geopolitical tensions between Saudi Arabia and Iran. Saudi Arabia’s government has blamed Iran for its involvement in the recent attack on the country’s oil infrastructure. Oil market participants are sensing a war between the US and Iran. Iran might end the multi-lateral agreement aimed to stop its nuclear program.
However, oil bulls shouldn’t ignore the U.S. Energy Information Administration’s oil inventories report for the week ending May 10. US crude oil inventories were 2% above their five-year average for the same week compared to on par with their five-year average the previous week—a concern for higher oil prices.