Energy (NYSEARCA:XLE) was the only sector decliner as the broader stock market racked up its best week since November 2020, while crude oil posted its first back-to-back weekly decline since December.
U.S. WTI April crude (CL1:COM) closed 1.7% higher Friday but fell 4.2% on the week at $104.70/bbl; the front-month contract has now dropped 9.5%, or $11, over the past two weeks as fears of global shortages caused by sanctions on Russian oil and war in Ukraine have yet to materialize in the physical market.
U.S. natural gas (NG1:COM) rose 2.9% for the week to $4.863/MMBtu following a larger than normal weekly storage decline and short-term weather forecasts that indicate cool temperatures and relatively healthy heating demand.
Fundamentally, oil markets remain tight but “until we get some resolution on what Russia’s ultimate goal is, you’re going to have a lot of sentiment and a lot of volatility in oil prices,” Tortoise portfolio manager Rob Thummel told Bloomberg, adding that current oil prices include at least a $20/bbl geopolitical premium.
The International Energy Agency, which last year urged an end to new oil, gas and coal projects as a way to help the environment, warned this week of an “emergency situation” for global energy security, days after stating in its monthly report that the potential loss of Russian oil exports “cannot be understated.”
The IEA published a 10-point plan that focuses on cutting consumption, including lowering speed limits on highways, car-pooling, working from home, eliminating air travel for business, taking trains instead of planes, and the adoption of “car-free Sundays.”
Energy closed at the bottom of the week’s sector standings, -3.8%, but the group has surged 33% YTD.