While crude oil price gave up the day’s gain, oil services stocks and sector-related ETFs remained among the best performers of the U.S. equity segment.
On Wednesday, the SPDR Oil & Gas Equipment & Services ETF (NYSEArca: XES) increased 3.2% and iShares U.S. Oil Equipment & Services ETF (NYSEArca: IEZ) advanced 2.5%, both ending a week-long losing streak, as traders may have saw a buying opportunity in a relatively cheaper market. Both XES and IEZ continue to trade below a 30 reading on the relative strength index, reflecting their undervalued conditions.
Meanwhile, West Texas Intermediate crude oil futures slipped 1.0% to $51.1 per barrel in late Wednesday trading after staying positive for most of the day.
Crude oil prices drew support earlier in the day from a report revealing a drop in U.S. crude inventories, a cut in Libyan exports and an OPEC deal that would cut output.
According to the U.S. Energy Information Administration, U.S. crude stockpiles declined by 1.2 million barrels for the week ended December 7, which was smaller than the 3 million barrels analysts had anticipated and lower than the draw reported by the American Petroleum Institute, Reuters reports.
“The divergence from the large inventory decline reported by the API makes the report appear more negative than it actually was,” John Kilduff, a partner at Again Capital Management, told Reuters. “The rebound in gasoline demand was notable, and should stay strong, now, into year-end, during the holiday shopping season.”
Furthermore, oil traders were optimistic after Libya declared force majeure on exports from its largest oilfield after tribesmen and state security guards stormed the facility. The sudden supply disruption follows in the heels of last week’s decision from the Organization of Petroleum Exporting Countries and its allies including Russia to cut supply by 1.2 million barrels per day.
“The OPEC+ deal from last week will allow more of a bullish position to be taken up by some market participants from this point,” analysts at JBC Energy said in a report. “The crude picture at least looks somewhat firmer for the next six months than it did previously.”
For more information on the oil market, visit our energy category.