Oil Price Dips Weigh On Energy Stocks As US Government Denies Urgent SPR Refill

Energy stocks, tracked by the Energy Sector Select SPDR XLE, are in a period of volatility as oil prices decline, owing to demand worries associated with banking sector turmoil.

According to U.S. Energy Secretary Jennifer Granholm, it would be "difficult" to replenish strategic oil stockpiles this year, putting the federal government's return to the market as a big buyer on hold.

In the fourth quarter of last year, the U.S. government pledged to buying back barrels when US oil prices were "at or below" $67 to $72 per barrel.

"It will be difficult for us to take advantage of this low price this year," Granholm said at a congressional hearing Thursday. She blamed the sale of 26 million barrels required by Congress and maintenance work at two of the four sites where the reserves are kept.

According to the Energy Information Administration (EIA), the SPR currently holds 371.6 million crude oil barrels, its lowest level since 1983.

Related Link: Biden The Master Oil Trader Part Deux? Crude Prices Plummet. Is A Government Windfall Coming?

On the supply side, signals of strong crude supply from Russia also impacted prices, since the previously stated drop in the country's oil output would come from a higher base than earlier suggested.

The International Energy Agency (IEA) predicted that in the first half of this year, global oil supply will "comfortably" surpass demand.

Goldman Sachs Cuts Oil Forecast: Goldman Sachs slashed its 12-month oil price forecast for Brent crude from $100 per barrel to $94 per barrel earlier this week, due to "banking stress, recession worries, and an exodus of investor flows.”

Correlation Between Energy Stocks, Crude Oil Realigns: XLE and WTI prices have been moving nearly in lockstep since the beginning of the year, indicating a resurgence of the historically strong link between crude oil prices and the performance of U.S. energy equities.

Energy Stocks Fall Below Key Moving Averages In March: XLE has shown violent bearish price action in March, pulling back on resistance at the 50-day moving average, and then breaking below the key support of the 200-day moving average.

For the first time since the end of September 2022, the daily momentum indicator, as measured by the relative strength index (RSI), reached oversold territory.

The 50-dma is pointing dangerously southward, and if it crosses the 200-dma from above it will form the so-called "death-cross pattern," which is typically seen as a bearish signal and has not occurred since 2018. 

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