Oil Prices Slide Again as U.S. Inventories Rise amid Record Production
WTI crude faces fourth weekly loss, down 1.66% with rising U.S. stockpiles and concerns over Chinese demand. Energy sector underperforms.
Despite a strong rebound on Friday - up from a four-month low - WTI crude oil prices suffered a fourth consecutive weekly loss (down 1.66%), with futures contracts slipping into contango (negative roll return), signaling a weak oil market. The downturn of 14.5% over the last four weeks is largely attributed to the unexpected surge in U.S. crude stockpiles with U.S. crude production at its highest level on record with no sign of dropping - the United States is the leading oil producer ahead of Saudi Arabia – as well as ongoing concerns about subdued Chinese energy demand.
According to data released by the U.S. Energy Information Administration, there was an unexpected rise in U.S. crude stockpiles of 3.6 million barrels for the week ending November 10th, significantly exceeding earlier forecasts. In addition to increased inventories, the United States maintained its record-high output levels with production standing at approximately 13.2 million barrels per day throughout the same week.
Meanwhile, concerns around weak Chinese energy demand, resulting from slowing industrial growth, continue to cast a shadow over global oil markets as China remains the top importer and the second largest consumer of crude oil.
All these factors combined are powerful enough to negate the current production cuts by Saudi Arabia and its OPEC+ partners and drive the oil market lower.
Despite the unfavorable market conditions, the S&P energy sector ended the week slightly in the green in the wake of Tuesday’s stock rally (+0.88%, bringing its year-to-date performance to -4.29%), but significantly underperformed the broad-based index (S&P 500 up +2.24% for the week, up +17.57% year-to-date).
Against this backdrop, the Horizons NYMEX Crude Oil ETF (HUC) declined by -0.32% last week bringing its year-to-date performance to +1.81%.
Group Data:
Funds specific data: HUC
Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.
