7 Jun

Oil’s Heading for the Third-Consecutive Weekly Decline

WRITTEN BY Rabindra Samanta

Energy stocks outperformed oil’s fall

On June 6, US crude oil July futures rose 1.8% from the lowest closing level since January 14 and settled at $52.69 per barrel. A 0.6% rise in the S&P 500 Index (SPY) might have supported oil prices. In the trailing week, US crude oil active futures fell 7.1%. On average, our list of oil-weighted stocks fell 2.1%. Denbury Resources (DNR) and California Resources (CRC) fell 11.3% and 9.4%. They were the underperformers among oil-weighted stocks.

Oil’s Heading for the Third-Consecutive Weekly Decline

Third-consecutive weekly loss in 2019

At 5:57 AM EST on June 7, US crude oil active futures were at $53.1, which is ~0.7% below the closing level the previous week. If US crude oil prices remain at those levels on June 7, then it would be the third consecutive weekly decline for US crude oil futures and the highest number of consecutive weekly declines since November 23.

Why are the bearish sentiments rising for oil?

In the week ending May 31, US crude oil weekly production made a new record high of 12.4 MMbpd (million barrels per day). The oil rig count might have bottomed out. Another increase in US crude oil production might disturb the global oil supply-demand equilibrium. On the other hand, Russia hasn’t clearly stated its stance on extending the production cut into the second half of this year.

Based on a news report, Russia might want a new agreement with its OPEC allies instead of continuing with the old agreement. OPEC and its allies’ 1.2 MMbpd production cut agreement between January and June is the most important factor behind oil’s rise in the first four months of 2019.

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