Oil rally fades as fears ease over Israel-Iran hostilities; week ends lower (NYSEARCA:XLE)

Crude oil futures posted a second straight weekly loss, marked by big swings with geopolitical risk perception rising and falling in the Middle East as Israel and Iran exchanged tit-for-tat strikes that caused little damage and were viewed as unlikely to spark a broader conflict.

Crude jumped by more than 3% in early trading Friday on news that Israel launched a retaliatory strike on Iran, but then retreated on signs of de-escalation, hitting their lowest level in more than two weeks.

Iran’s missile and drone barrage against Israel last weekend was largely priced in by investors, but uncertainties around Israel’s response kept the market on edge throughout the week.

But oil has not truly rallied because there “hasn’t been any increased risk to high production countries in the region” with Saudi Arabia, United Arab Emirates and Iraq staying out of the conflict, Tradition Energy’s Gary Cunningham told MarketWatch. “Really, only Iran’s barrels are at risk, and that would only be if wider hostilities broke out.”

Front-month Nymex crude (CL1:COM) for May delivery settled -2.9% for the week to $83.14/bbl, and June front-month Brent crude (CO1:COM) closed -3.5% to $87.29/bbl; both benchmarks posted modest gains on Friday, up 0.5% and 0.2%, respectively.

Also, front-month May Nymex natural gas (NG1:COM) finished the week -1% to $1.752/MMBtu.

ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI), (UNG), (BOIL), (KOLD), (UNL), (FCG)

Global demand indicators were mixed during the week, as U.S. crude inventories were bearish, rising by a far more than expected 2.7M barrels, while China’s Q1 gross domestic product increased 5.3% Y/Y, beating expectations and sending a bullish signal to oil markets.

The energy sector, as indicated by the Energy Select Sector SPDR ETF (NYSEARCA:XLE), ended the week -1.2%.

Top 5 gainers in energy and natural resources in the past 5 days: Drilling Tools International (DTI) +11.9%, Eco Wave Power (WAVE) +10.8%, Cross Timbers Royalty Trust (CRT) +10%, Spruce Power (SPRU) +9.8%, Silvercrest Metals (SILV) +9.5%.

Top 5 decliners in energy and natural resources in the past 5 days: Lithium Americas (LAC) -33.2%, Critical Metals (CRML) -26.9%, BP Prudhoe Bay Royalty Trust (BPT) -21.9%, Marine Petroleum (MARPS) -20.8%, U.S. Goldmining (USGO) -16.9%.

Source: Barchart.com