Energy sector-related exchange traded funds stood out with positive gains and were among the lone bastions in the market on Thursday, despite a pullback in the crude oil markets.
On Thursday, the VanEck Vectors Oil Service ETF (OIH ) gained 1.7% and iShares U.S. Oil Equipment & Services ETF (IEZ ) increased 0.9%. Meanwhile, the broader Energy Select Sector SPDR (XLE ), the largest equity-based energy exchange traded fund, was 0.6% lower.
Meanwhile, the United States Oil Fund (USO ), which tracks West Texas Intermediate crude oil futures, and the United States Brent Oil Fund (BNO ), which tracks Brent crude oil futures, were 1.0% and 0.7% lower, respectively, on Thursday while WTI crude oil futures were down 0.2% to $41.4 per barrel and Brent crude gained 0.7% to $44.1 per barrel.
Crude oil prices extended their losses on Thursday, slipping to their lowest level since early August, due to concerns over weakening U.S. gasoline demand and a slowing economic recovery from the COVID-19 pandemic, Reuters reports.
Energy Information Administration revealed U.S. gasoline demand last week fell to 8.78 million barrels per day from 9.16 million bpd a week earlier.
“It is the latest data set that possibly caught the eye of those who ran long positions, and not even another record close in the U.S. stock market was able to change the direction of the herd,” Tamas Varga of oil brokerage PVM told Reuters.
Market watchers also looked to the latest U.S. economic data to guide their outlook on energy demand. The latest economic data was mixed, with a dip in weekly jobless claims and a higher trade deficit in July. Furthermore, an index of non-manufacturing companies — retailers, banks, airlines, health-care providers, and the like — fell in August, MarketWatch reports.
A weak U.S. dollar has also limited the upside of USD-denominated commodities, including oil.
“The macro picture has started to send more mixed signals to the oil market, with strength in equity markets more and more concentrated on a few indices/industries, key government bond interest rates trending lower and the U.S. Dollar index in rebound mode after the EUR/USD exchange rate hit the $1.20 level two days ago,” analysts at JBC Energy said in a note.
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