Thursday Market Update: Why Are Oil Inventories Going Down Today?

It’s been an odd day in the stock market with interest returning to high growth and otherwise speculative games. With that in mind, many investors may be just wondering why oil stocks are down today.

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It’s a pretty complicated question to tackle. However, there are a few factors at play that are pushing the energy sector as a whole down today. the IShares US Energy ETF (NYSEARCA:IYE) is down almost 4% at the time of writing, reflecting that sentiment.

Let’s take a look at some of the factors that are driving down oil today.

Why are oil stocks falling today?

Okay, let’s start with the political landscape first. Most investors know that President Joe Biden has recently been hostile to the energy industry. A series of pipeline permit cancellations and a heavy focus on investing in clean energy instead have laid the groundwork for what Biden hopes will be a long-term infrastructure revitalization.

In recent days, he has reportedly been looking for ways to slow down oil and gas drilling. This decision follows “a court decision [that] ended its freeze on federal drilling auctions. Whether Biden succeeds in limiting or blocking further drilling leases remains to be seen. However, its apparent tendency to do so is not bullish for energy stocks.

In addition, it was reported today that a major Chinese port is facing a bottleneck. The Yantian Port Authority noted that a six-day shutdown on export containers due to a Covid-19 outbreak has caused significant congestion at that port.

However, as we have seen with the recent blockade of the Suez Canal, oil prices have risen following this news. And some analysts remain bullish on oil, citing price targets of $ 100 for oil on strong demand from this pandemic. In addition, other famous investors such as David Tepper have lent their support to energy stocks.

For those who think the best time to buy stocks is when they are battered, this makes sense. However, energy stocks have recovered well from pandemic lows. As a result, how much of this post-pandemic outbreak is already being accounted for remains the question.

As of the publication date, Chris MacDonald does not have (directly or indirectly) any position in any of the stocks mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.


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Felix J. Dixon