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Energy (NYSEARCA:XLE) climbed to the top of Tuesday’s S&P sector leaderboard as crude oil prices rose on speculation that China is preparing to gradually exit its stifling zero-COVID policy.
Crude oil also was lifted by a Wall Street Journal report that said Saudi Arabia is on high alert for a potential Iranian attack, with an extra assist from a weakening dollar.
Front-month Nymex crude (CL1:COM) for December delivery settled +2.1% to $88.37/bbl, and January Brent crude (CO1:COM) closed +2% to $94.65/bbl, with both benchmarks snapping two-session losing streaks.
ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (USOI), (NRGU)
Also, U.S. natural gas futures (NG1:COM) plunged -10.1% to $5.714/MMBtu, giving back most of Monday’s surge, as volatile trade in the commodity continues.
Refiners Marathon Petroleum (MPC) and Valero (VLO) closed Tuesday +4.8% and +3.5% as both posted better than expected Q3 earnings, as cheaper than expected natural gas allowed refiners to hold down processing costs.
Crude oil futures began to rise after an unverified social media post triggered speculation that China might phase out COVID restrictions, although China’s Foreign Ministry said it was unaware of such a plan.
“Potential changes to China’s COVID policy – real or speculated – will create volatility in crude trading,” CIBC Private Wealth Management’s Rebecca Babin said, while adding that Tuesday’s move higher “would be much more significant” if investors really believed China was changing policy.
WTI crude advanced 8.9% in October while Brent rose 7.8%, with some support attributed to the decision by OPEC+ to cut production by 2M bbl/day beginning in November.
