Oil and energy related exchange traded funds slipped Wednesday as Saudi Arabia’s crown prince laid the fate of the Organization of Petroleum Exporting Countries’ output freeze on Iran’s shoulders.
On Wednesday, the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, fell 3.1% toward its 50-day support while the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, dropped 2.8%.
WTI crude oil futures were 3.5% lower Wednesday to $37.0 per barrel, and Brent crude oil futures were down 3.7% to $38.8 per barrel.
Meanwhile, the energy sector was the worst performing segment of the S&P 500 on Wednesday, with the Energy Select Sector SPDR (NYSEArca: XLE) down 1.3% as energy producers retreated on the weaker oil outlook.
“The primary reason that oil prices are being dealt a solid dose of the WBWs (whoop-bang-wallops) today lies with Saudi Prince Mohammed bin Salman,” Matt Smith, director of commodities research at Clipperdata, said in a note, according to Reuters. “The King’s son threw cold water on hopes of a production freeze.”
Oil has started off as one of the worst assets of the first day in the second quarter, declining after Saudi Deputy Crown Prince Mohammed bin Salman stated that the kingdom of Saudi Arabia will not join a program to freeze crude oil output without the participation of Iran and other major producers, reports Mark Shenk for Bloomberg. Moreover, the prince also noted that the country could even raise output if any other country boosts sales.
[related_stories]The oil cartel is expected to meet in Doha this month to go over an accord on capping output.
“The Saudis are now saying that they will only freeze if everyone else lines up behind the idea,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, told Bloomberg. “That makes the meeting useless since the Iranians are going to continue increasing output.”
Iran, which is just coming off a years of a sanctions and embargo, has been left out of the oil market and is just beginning to ramp up production for global sale. The Middle East country maintained that it will not contribute to any output freeze until its crude exports hit pre-sanction levels.
United States Oil Fund