A global supply glut has weighed on the energy markets, but U.S. crude storage levels have declined for another week, supporting oil and energy exchange traded funds as traders adjust to more favorable fundamentals.
On Wednesday, the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, gained 2.5% and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, rose 1.9% with WTI crude oil futures trading at $51.7 per barrel and Brent crude at $52.9 per barrel. Over the past month, USO jumped 14.5% and BNO increased 11.4%.
In the equities market, oil services-related ETFs led gains on Wednesday, with the VanEck Vectors Oil Service ETF (NYSEArca: OIH) up 3.6%, SPDR Oil & Gas Equipment & Services ETF (NYSEArca: XES) up 3.7% and iShares Dow Jones U.S. Oil Equipment Index ETF’s (NYSEArca: IEZ) up 3.6%. Meanwhile, the broader Energy Select Sector SPDR (NYSEArca: XLE), the largest equity-based energy ETF, was 2.1% higher.
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Energy markets strengthened after the U.S. Energy Information Administration revealed U.S. crude storage levels fell by a bigger-than-expected 5.2 million barrels in the week ended October 14, a withdrawal for six of the past seven weeks, reports Timothy Puko for the Wall Street Journal.
“Maybe the market is just not as bad as we thought it was,” Scott Shelton, broker at ICAP, told the WSJ.
Analysts previously anticipated an injection of two million barrels, which is in line with seasonal trends in October after the end of the summer driving season, further supporting the bullish trade.