Oil prices climbed Monday following Saudi Arabia's decision Sunday to cut oil production by one million barrels per day in July. Meanwhile, U.S. energy giants Chevron and Exxon Mobil advanced early before dropping.
U.S. crude oil prices rose 2.4% to $73.47 per barrel Monday following the announcement that the Saudis would cut oil production. Meanwhile, Brent crude futures advanced 3% to around $79 per barrel.
Saudi Arabia's voluntary, one-million-barrels-per-day cut sent a clear message to speculators piling into short-sale positions, helping to hold down recent oil prices. The Saudi move came amid a complex meeting of the Organization of the Petroleum Exporting Countries and its allies, including Russia, (OPEC+).
The oil cartel officially agreed Sunday to extend overall current production through 2024. Saudi Arabia's cutback means larger production quotas for some OPEC members, most notably the United Arab Emirates. Meanwhile, weaker-than-expected demand from China demand, along with excess production by Russia, have also worked to hold crude oil prices near 52-week lows.
Saudi Arabia said the output cut is initially planned for one month only. It comes on top of previously announced production reductions, which it now plans to extend until the end of 2024. Ahead of the meeting, Saudi Arabia signaled a production cut could be on the table in response to short sellers.
Before the weekend OPEC+ meeting, a Saudi Arabia's Energy Minister Prince Abdulaziz bin Salman in a highly unusual move specifically warned short sellers to "watch out."
Oil and energy stocks propped Monday's premarket trade. Devon Energy, APA, Marathon Oil, Halliburton and Occidental Petroleum lead the S&P 500. Energy giant Chevron hoisted the Dow Jones Industrial Average. Meanwhile, Nasdaq composite futures lagged in early action.
OPEC+'s Surprises
Sunday's meeting follows a decision from OPEC+ on April 2 to cut production by 1.15 million barrels a day starting in May. The oil cartel had previously signaled it would hold supply steady throughout 2023. In October, OPEC+ cut output by 2 million barrels per day.
Analysts saw this as a proactive move by OPEC, responding to concerns of a recession in 2023. In addition, many industry watchers read the move as reaction to the risk of a disappointing reopening of China's economy and a possible recession in the U.S.
After the April announcement, oil prices spiked to five-month highs before pulling back. So far in 2023, oil prices and natural gas futures have dropped considerably vs. the 2022 levels, which were fueled by Russia's invasion of Ukraine. Those 2022 prices, in turn, drove sky-high oil prices and profits for oil producers.
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Oil Prices, Energy Stocks, Respond To OPEC+
Among energy stock action Monday, Chevron stock and Exxon Mobil stock fell 0.5%. Meanwhile, oil field services firms angled lower after jumping early Monday. Halliburton and SLB dropped 1.5% and 1.2%, respectively. Baker Hughes edged up 0.3%.
Energy stock Diamondback Energy dropped 0.8% while Occidental Petroleum fell 0.5%. Devon Energy edged down 0.4%.
Chevron stock ranks 10th in the Oil & Gas-Integrated industry group. The energy stock has a 53 Composite Rating out of 99. Chevron has a 38 Relative Strength Rating, an exclusive IBD Stock Checkup gauge for share-price movement. The EPS rating is 65.
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