Energy-related exchange traded funds strengthened Wednesday as tensions between Russia and the West over Ukraine threaten the crude oil markets and the Biden administration halts oil leases amid a legal fight over climate-change costs.
Among the better-performing non-leveraged ETFs of Wednesday, the Invesco DWA Energy Momentum ETF (PXI) gained 1.8%, and Invesco S&P SmallCap Energy ETF (NasdaqGM: PSCE) added 3.0%. The widely observed Energy Select Sector SPDR Fund (NYSEArca: XLE) increased 1.0%.
Meanwhile, the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, were also up 0.9% and 0.7%, respectively, on Thursday.
“There’s no forecastable outcomes here,” Eric Freedman, chief investment officer at U.S. Bank Wealth Management, told NBC News. “Anytime there’s conflict on this potential scale, markets just don’t have an edge.”
The biggest threat to the energy markets is that Russia, which accounts for about 10% of the global oil supply and ally member of the Organization of Petroleum Exporting Countries or OPEC+, will respond to Western sanctions by cutting its exports, which could further fuel volatility in the oil sector and the markets.
Further weighing on President Joe Biden’s bid to bring down energy prices here at home, the administration has delayed its decisions on new oil and gas drilling on federal land and other energy-related actions after a federal court blocked the way officials were calculating the costs of climate change, the Associated Press reports. There will be an indefinite delay on planned oil and gas lease sales over public lands in a half-dozen Western states, including Wyoming, Montana, and Utah.
It is “confirmed that certain activities associated with fossil fuel leasing and permitting programs are impacted by the February 11, 2022, injunction,″ the Interior Department said in a statement. “Delays are expected in permitting and leasing for the oil and gas programs.″