Energy sector ETFs were among the hardest hit Thursday on expectations of rising growth in oil supply over the next year with a wave of global production keeping crude prices stuck in a bear market.

Among the best performing non-leveraged ETFs of Thursday, the SPDR Oil & Gas Equipment & Services ETF (NYSEArca: XES) declined 6.9% and SPDR S&P Oil & Gas Exploration & Production ETF (XOP) decreased 6.2%. Meanwhile, the Energy Select Sector SPDR (NYSEArca: XLE), the largest equity-based energy exchange traded fund, fell 2.4%, breaking below its short-term support at the 50-day simple moving average.

The U.S. is expected to continue fueling a good portion of the rising output ahead, along with greater production out of smaller producers like Brazil and Norway, the Wall Street Journal reports.

Looking ahead, Citigroup and JPMorgan Chase analysts project global supply will expand roughly one million barrels per day more than total demand in 2020, contributing to a surplus each quarter of next year.

The expected global supply glut is also the latest threat to the Organization of the Petroleum Exporting Countries and other producers, which have already enacted production caps in an attempt to stabilize prices and balance the market.

Many market observers have long anticipated growing supply out of U.S. shale producers to continue as new oil pipelines are constructed in the Permian Basin of Texas and New Mexico to ease bottlenecks in the region.

Analysts, though, warned that the addition of barrels from ancillary producers threatens to make the expected surpluses even worse, especially with renewed concerns over a slowing world economy weighing on the demand side outlook.

Analysts calculate projects in Brazil, a Norwegian oil field in the North Sea and easing production curtailments in Canada could pump out several hundred thousand barrels a day of crude next year, which would further bolster bets that output will exceed consumption.

“Those are very relevant in tipping the scales,” Rebecca Babin, a senior energy trader at CIBC Private Wealth Management, told the WSJ. “It’s very hard for people to look at the 2020 supply-demand imbalances and want to get long,” referring to bullish positions.

For more information on the energy sector, visit our energy category.

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