U.S. crude oil futures eked out a 0.01% gain for the week, enough to score an 11th increase in the past 13 weeks, with market uncertainty running high as investors try to decide if crude is overbought or if triple-digit pricing could return for the first time since July last year.
Front-month Nymex crude (CL1:COM) for November delivery ended the week at $90.03/bbl, but despite WTI’s tiny gain, Brent crude finished with a small decline after posting three straight weeks of gains, shedding 0.7% for the week to settle at $93.27/bbl.
ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI)
Even in a week that saw the Federal Reserve warn of further rate hikes, energy markets also were focused on Russia’s new ban on diesel and gasoline exports.
Russia ships ~1M bbl/day of diesel, making it one of the world’s biggest seaborne exporters of diesel, and the ban likely will raise already high diesel prices, but the severity of the impact should depend on how long the export ban is in place.
The Kremlin said the ban was “temporary” and designed to address rising energy prices in Russia, but the timing raises suspicions in western capitals that Vladimir Putin is again leveraging Russia’s power over energy markets.
While Russia may have some domestic supply issues, Putin “still wants to cause chaos [and] break the west’s resolve to support Ukraine,” RBC Capital’s Helima Croft said. “His goal seems to be to make it to next year and see the impact on the U.S. presidential election.”
Analysts at Citigroup and J.P. Morgan Chase expect the ban will last weeks, not months, as once the heaviest demand from agriculture passes, allowing Russia to harvest what should be a bumper crop, pressures to keep diesel at home should abate.
Citi said domestic Russian diesel demand for the harvest is set to peak in the next 3-5 weeks, predicting the ban will last only slightly longer than that.
The diesel export ban will be felt, but Russia is a much smaller exporter of gasoline, exporting only 90K bbl/day in August, according to Kpler.
Energy stocks, as represented by the Energy Select Sector SPDR ETF (NYSEARCA:XLE), finished -2.9% for the week, in the middle of the S&P sector standings.
Top 5 gainers in energy and natural resources during the past 5 days: (LZM) +39.8%, (ATLX) +13.1%, (WAVE) +11.3%, (LTBR) +11%, (GPP) +10.9%.
Top 5 decliners in energy and natural resources during the past 5 days: (AMTX) -15.8%, (LAC) -15.2%, (PLL) -14.8%, (USAU) -14.8%, (NRGV) -14.2%.