Oil and gas stocks were the worst performing S&P sector for a second straight session on Wednesday, as U.S. crude oil futures settled in a bear market, falling more than 20% from a March peak.
Front-month WTI crude (CL1:COM) closed -1% at $98.53/bbl, the lowest in nearly three months and the second straight settlement below $100, while front-month Brent crude (CO1:COM) ended -2% at $100.69/bbl after dipping below $100 for the first time since April.
Energy stocks (XLE) closed mostly down but off session lows, and only EOG Resources (EOG) and Diamondback Energy (FANG) finished among the day’s largest losers on the S&P 500, -3.7% and -3.4% respectively.
ETFs: (NYSEARCA:USO), (NYSEARCA:UCO), (SCO), (USL), (DBO), (USOI), (NRGU), (OILK), (OLEM)
Nymex natural gas (NG1:COM) was little changed, closing -0.2% to $5.51/MMBtu; European natural gas prices fell sharply after a strike by Norwegian oil and gas workers was called off.
The U.S. and its allies have discussed trying to cap the price on Russian oil at $40-$60/bbl, aiming to cut Vladimir Putin’s revenue for the war in Ukraine but running the risk that a poorly executed plan could lead to a spike in oil prices, Bloomberg reported Wednesday.
Biden administration officials are having multiple meetings each week on a price cap, an effort that will intensify in the coming weeks, according to the report.
The U.S. reportedly is concerned that the European ban as is, which begins to come into force at the end of the year, could contribute to oil prices spiking even further and potentially leading to a global recession.
J.P. Morgan analysts warned recently that crude prices could skyrocket to as high as $380/bbl if Russia retaliates to price caps by imposing deep cuts in oil production.