Energy ETFs rally to growing demand and ongoing supply issues
The energy sector and related exchange-traded funds surged on Thursday, as growing demand for fuel, tight US crude inventories and problems with oil sands production in Canada all helped boost the market.
Thursday the ETF ALPS Alerian MLP (NYSEArca: AMLP) increased by 2.9% and the ETN JPMorgan Alerian MLP Index (NYSEArca: AMJ) advanced 2.8%. Most widely observed Energy Select Sector SPDR Fund (NYSEArca: XLE) gained 3.5%.
Meanwhile, the United States Petroleum Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, and the US Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, was also up 1.8% on Thursday. WTI crude oil futures rose 1.4% to $ 73.2 per barrel, and Brent crude rose 1.4% to $ 77.2 per barrel.
“Oil prices continue to thrive on the momentum of supply constraints in the Gulf of Mexico in the United States, which was reflected in last week’s Large Crude Inventory Report,” he said. Louise Dickson, analyst at Rystad Energy, told CNBC.
The US Energy Information Administration has revealed that U.S. crude inventories for the week ended September 17 fell 3.5 million barrels to 414 million, their lowest level since October 2018.
The oil gains were also supported by the Organization of the Petroleum Exporting Countries and its allies, also known as OPEC +, as several members have struggled in recent months to increase production due to years of underinvestment or delays in maintenance work due to the coronavirus pandemic. .
Additionally, a weaker US dollar helped support USD-denominated commodities like crude oil after the Federal Reserve said it would soon start cutting monthly bond purchases and considering interest rates. higher next year, but this allowed for some leeway.
The US central bank “has signaled in advance its intention to cut spending, confirming its economic optimism, which ultimately points to strong demand for oil in the United States,” Barbara Lambrecht, analyst at CNBC, told CNBC. Commerzbank.
Meanwhile, Syncrude Canada Ltd., a light crude producer majority owned by Suncor Energy Inc., cut supplies in September due to mechanical issues at its oil sands site, Bloomberg reported. According to a force majeure notice sent by one of Syncrude’s four owners, supply cuts of up to 20% could occur in September, a person familiar with the decision told Bloomberg.
The additional supply cuts came at a time when production off the Gulf of Mexico remains low following Hurricane Ida, which forced most offshore production in the region to shutdown.
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