Wednesday morning’s trading brought a strange set of events to the United States Oil Fund (NYSEARCA:USO), which dropped nearly 4% at the time of writing on a string of interrelated news items. While there were some clear moves to continue measures that restricted the supply of oil and gas, there were other moves that rendered those actions largely moot on growing demand destruction.
First was word about inventories. Indeed, crude inventories fell by -2.2 million barrels, which was the same as the total from last week. Consensus estimates proved wildly off, with projections of a -0.446 million barrel drop. Gasoline inventories, meanwhile, surged, hitting 6.5 million barrels against the one million barrels seen the week before. Consensus estimates were destroyed, as those came in at 0.161 million barrels. Yet, despite these unexpected changes in inventory, supply cuts are poised to continue.
OPEC+ got its Joint Ministerial Monitoring Committee together, and the committee’s call was to stay the course, with both Saudi Arabia and Russia continuing their supply cuts to the end of the year. They’re looking to keep oil prices high to help keep cash coming in, but it’s starting to look like demand destruction is outpacing supply cutting. The big issue wasn’t so much the rise of electric vehicles or any kind of ecological issue, but rather, simple macroeconomic headwinds. With households pulling back on spending ahead of what they believe may be a disaster in the making, that’s keeping cars—and their drivers—at home a little more.
Is The United States Oil Fund ETF a Good Buy Right Now?
As for the United States Oil Fund, a look at the last five days of trading shows a sea of red ink. There was already a natural decline in progress. But this morning brought a near-vertical drop with it before continuing a more organic decline pattern.
