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Are Equity Markets Limiting Your Energy Portfolio’s Upside?

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Are Equity Markets Limiting Your Energy Portfolio’s Upside? PART 1 OF 5

Why Geopolitical Factors May Not Ease for Oil Soon

US crude oil

On April 12, 2018, US crude oil May futures rose 0.4% and closed at $67.07 per barrel, their highest closing level in more than three years. On the same day, US crude-oil-tracking ETFs had the following performances:

  • The United States Oil ETF (USO) rose 0.5%.
  • The PowerShares DB Oil ETF (DBO) rose 0.1%.
  • The ProShares Ultra Bloomberg Crude Oil ETF (UCO) rose 0.8%.

Why Geopolitical Factors May Not Ease for Oil Soon

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On April 12, 2018, oil-weighted stocks Denbury Resources (DNR) and Whiting Petroleum (WLL) fell 1% and 0.1%, respectively.

Geopolitical concerns may not ease for oil soon

Between April 5 and April 12, 2018, US crude oil May futures gained 5.6%. Geopolitical tensions were behind oil’s rise in the trailing week. Moreover, news reports suggest that the United Kingdom could join the US in a possible missile strike on Syria, which could escalate geopolitical tensions.

Natural gas

On April 12, natural gas May 2018 futures rose 0.4% and settled at $2.686 per million British thermal units. The EIA’s (U.S. Energy Information Administration) natural gas inventory report was released on April 12.

The EIA reported a decline of 19 Bcf (billion cubic feet) in natural gas inventories for the week ending April 6, 2018, eight Bcf more than the market’s expected fall, which could be a positive development for natural gas prices. Moreover, the gain in natural gas prices on April 12, 2018, helped natural gas May futures to close 0.4% up in the trailing week.

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