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US Oil, Gas Stocks Slide as US-Iran Deal Optimism Pressures Crude Prices, RBC Says

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US energy stocks extended losses over the past week as easing geopolitical tensions in the Middle East weighed heavily on crude prices, while investors shifted focus to concerns about oversupply and downside risks, RBC Capital Markets strategists said in a note on Thursday.

RBC analysts said WTI traded in a range of $75 per barrel to $80/bbl during the week before retreating to levels last seen in early March, as markets grew confident that the US and Iran would sign a deal to reopen the Strait of Hormuz and allow Iranian crude exports.

Market participants are now weighing whether the agreement translates into a normalization of shipping flows and a meaningful increase in supply, they said in a weekly note.

The geopolitical-driven decline in oil prices has come despite a tightening US supply backdrop, with crude inventories posting seven consecutive weekly draws.

However, expectations of a future supply glut have resurfaced after the International Energy Agency projected that an additional 8 million b/d of supply could overwhelm demand growth of about 2 million b/d once flows via the Hormuz fully normalize.

Oil-weighted exploration and production companies fell 8% over the week, while gas-focused producers declined 3%, RBC said. Large-cap producers were down 6%, with small- and mid-cap names losing 8%.

RBC said the SPDR S&P Oil & Gas Exploration & Production ETF dropped 7% during the period as WTI crude tumbled 17%, while Henry Hub natural gas prices were largely unchanged.

Meanwhile, market participants' discussions were dominated by macroeconomic and oil market concerns following signs of a resolution to the Iran conflict.

RBC said that investors questioned the potential for further downside in crude prices and debated the need for strategic stockpiling and the pace at which offline supply could return.

Price: $152.02, Change: $-3.73, Percent Change: -2.39%

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