Shares of major U.S. energy companies soared this week, driven by escalating tensions between Iran and Israel and fears of oil supply disruptions. The Energy Select Sector SPDR Fund (XLE) experienced its strongest performance in two years, fueled by investor confidence. Meanwhile, oil prices climbed to their highest levels since late August, reaching $75 per barrel.
President Biden acknowledged discussions about a potential Israeli strike on Iranian oil facilities, raising concerns about escalating tensions in the Middle East. While he suggested such an action is unlikely, his comments caused a surge in oil prices and the US dollar. The possibility of an Israeli strike has been a point of contention, as Israel’s Prime Minister Benjamin Netanyahu has shown little restraint in recent days.
The Biden administration has continued its efforts to stabilize the oil market by purchasing an additional 6 million barrels of crude oil for the Strategic Petroleum Reserve (SPR). This latest acquisition brings the total amount of oil purchased for the SPR to over 55 million barrels since last year. The administration’s actions demonstrate its commitment to managing oil supply and protecting consumers from price volatility.
ExxonMobil has announced a significant $10 billion investment in Nigeria’s deep-water oil operations, focusing on developing its Owo project. This investment comes despite plans to divest onshore assets and aims to increase production by 50,000 barrels per day. The move has been met with positive responses from Nigerian officials, who see it as a sign of a more investment-friendly environment.
A new report reveals that Western nations are unknowingly contributing to Russia’s war effort by purchasing Russian oil processed in Turkish refineries. This practice creates a loophole in the sanctions regime, allowing Russia to profit from the sale of oil indirectly. The report calls for a ban on imports from refineries using Russian crude and any products derived from Lukoil, a sanctioned Russian energy giant.
Oil prices have fallen sharply as fears of slowing demand in China outweigh the risk of energy shortages due to a storm in the Persian Gulf. Investors are also expecting a decrease in oil consumption in Europe and the US following the summer driving season, further contributing to the price drop.
CNBC’s ‘Halftime Report Final Trades’ segment featured insights on key stocks, including financials, oil, tech, and a new S&P 500 addition. Shannon Saccocia favored iShares U.S. Financials ETF, while Jim Lebenthal highlighted Exxon Mobil’s recent performance. Stephen L. Weiss saw value in Alphabet, and Joseph M. Terranova pointed out Palantir’s inclusion in the S&P 500.
Chevron and Exxon Mobil faced significant losses last week due to economic concerns. A slowing economy, weak consumer confidence in China, and geopolitical uncertainties in the Middle East have all contributed to falling oil prices. However, there are also potential catalysts for a rebound, including damage to Russian oil infrastructure and increasing demand from India. Investors are navigating this volatile market through leveraged ETFs, but caution is advised due to the risks associated with daily compounding.
Citigroup analysts predict that oil prices could plummet to $60 per barrel by 2025 if OPEC+ doesn’t further cut production. Increased supply from non-OPEC countries and waning demand are contributing factors. The bank recommends selling oil when prices approach $80 per barrel.
Goldman Sachs predicts that artificial intelligence (AI) will have a significant impact on the oil market over the next decade, potentially lowering prices due to reduced production costs and increased recoverable resources. While AI is expected to boost demand for power and natural gas, its effect on oil demand is projected to be modest.
