Oil prices fell despite a decline in U.S. commercial crude inventories.
Dreamstime
Energy stocks fell hard on Wednesday as oil prices dropped more than they have in a year.
The problem is that Americans are using less gasoline, probably a reaction to high prices. Average gas prices are now at $3.79 per gallon.
West Texas Intermediate crude, the U.S. benchmark, fell 5.6% to $84.22 per barrel, the largest percentage decline since September 2022. Brent crude, the international benchmark, fell 5.6% to $85.81.
The latest government data, released on Wednesday, showed that storage tanks are filling up with gasoline, an indication that people are pumping less of it into their cars. In fact, J.P. Morgan analyst Prateek Kedia wrote in a note on Wednesday that Americans are using less gas than they have in 22 years.
“Sharply higher gasoline prices over the last three months have likely driven this weakness with four-week average US gasoline consumption at 8.3 million barrels per day, 1.1 million lower from when retail gasoline prices bottomed out at the end of June,” Kedia wrote.
Rising interest rates are also raising concerns that the economy could grow more slowly, cutting into demand.
Not only has the Federal Reserve made it clear that it may raise its target for the fed-funds rate higher than investors had expected, and keep it elevated for longer, but yields have been taking off for longer-dated Treasury debt. That boosts the cost of longer-term loans such as mortgages, with potentially negative consequences for the housing market.
The decline in oil prices was sending energy stocks lower. The
S&P 500 Energy Sector
was down 3.3%, making it the market’s worst-performing sector, putting it on pace for its largest percentage decrease since May 2.
Chevron
(ticker: CVX) was the worst performer in the
Dow Jones Industrial Average
after falling 2.3%.
Devon Energy
(DVN) fell 5.3%.
Phillips 66
(PSX) was down 4.5%,
Schlumberger
(SLB) was off 4.7%, and
Marathon Petroleum
(MPC) fell 3.7%.
Halliburton
(HAL) was down 4.5% while
Occidental Petroleum
(OXY) was 3.9% lower.
Write to Angela Palumbo at [email protected]
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