Energy Stocks Slip Thursday Amid Supply Tensions

Energy shares retreated Thursday afternoon, dragging the NYSE Energy Sector Index down 1.2% and the State Street Energy Select Sector SPDR ETF (XLE) lower by 1.4%. The Philadelphia Oil Service Sector Index fell 1.7%, while the Dow Jones US Utilities Index dipped 0.1%. These declines coincided with escalating geopolitical risks and mixed commodity price movements.

According to CNN, President Volodymyr Zelensky stated that Ukraine intends to restart attacks on Russian oil refineries after a three-day pause linked to a sudden "energy ceasefire." In a separate development, CNN reported that two cargo vessels sank near the Strait of Hormuz within the last day following strikes by unidentified projectiles. The report cited the Maritime and Port Authority of Singapore and the International Maritime Organization regarding the maritime incidents.

In energy markets, front-month West Texas Intermediate crude gained 3.1% to reach $98.04 per barrel. Conversely, the global benchmark Brent crude contract slipped 0.3% to $105.78 a barrel. Henry Hub natural gas futures rose 0.7% to $3.22 per 1 million BTU.

The International Energy Agency announced it would finalize the remaining distribution of approximately 100 million barrels of oil, aligning with the March collective response to the Hormuz crisis. The agency indicated it would expedite these remaining releases, which include over 20 million barrels of diesel, as quickly as possible.

US crude oil inventories, encompassing the Strategic Petroleum Reserve, dropped by 8.6 million barrels in the week ending Oct. 9, following a 4.0 million barrel decrease in the prior week. Commercial crude stocks, which exclude SPR holdings, accounted for the full 8.6 million barrel decline. This result diverged from a Bloomberg survey that projected a 150,000-barrel increase. US natural gas inventories climbed by 67 billion cubic feet in the same period, a smaller gain than the 74 billion cubic feet anticipated in a Bloomberg survey and less than the 85 billion cubic feet rise seen in the previous week.

SM Energy (SM) shares declined 1.5% after the firm disclosed late Wednesday that it anticipates a net derivative settlement loss of $207 million for the third quarter, a factor that will weigh on quarterly earnings. Venture Global (VG) announced it has entered agreements with GE Vernova (GEV) and Baker Hughes (BKR) Energy Services to broaden its grid-independent power infrastructure, which could facilitate up to 10 gigawatts of extra computing capacity; its stock fell 5.2%. TotalEnergies (TTE) forecast third-quarter hydrocarbon output between 2.45 million and 2.50 million barrels of oil equivalent per day, representing a year-over-year increase of more than 4% when excluding Middle East conflict effects; its shares dropped 0.4%.