A large-than-expected drawdown in U.S. crude stockpiles helped offset concerns over weakening oil demand, lifting energy sector-related exchange traded funds on Wednesday.
Among the best performing non-leveraged ETFs of Wednesday, the SPDR Oil & Gas Equipment & Services ETF (NYSEArca: XES) rose 2.8%, iShares U.S. Oil Equipment & Services ETF (NYSEArca: IEZ) gained 2.6% and SPDR S&P Oil & Gas Exploration & Production ETF (XOP) increased 3.2%.
Boosting the energy markets, the Energy Information Administration revealed U.S. crude oil inventories fell last week by 10 million barrels, compared to expectations of a decline of 2.1 million barrels, Reuters reports.
“There’s a lot of big numbers here, but it’s all on the import number, which is pretty impressive,” Bob Yawger, director of energy futures at Mizuho, told Reuters.
Lower imports helped magnify the drawdowns
Net U.S. crude imports dropped by 1.51 million barrels per day to 2.9 million barrels per day while imports in the Gulf Coast region slipped to the lowest on record of 1.2 million barrels per day. To put this in perspective, crude oil imports averaged about 7 million barrels per day in the past week or 12.3% less than the same four-week period year-over-year.
“It was an incredibly bullish report, one of the more bullish we’ve had in a while, with draws across the board and of course the massive crude oil drop, which was generated by another drop in imports,” John Kilduff, a partner at Again Capital, told Reuters, adding that the draw down was likely due to a drop in Saudi exports to the U.S.
The updated inventory levels helped offset some of the demand side fears that have been growing in response to the prolonged U.S.-China trade war. Many believe that an extended trade tiff between the world’s two largest economies could contribute to a global slowdown or even an economic recession.
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