U.S. oil prices continued to pull back Wednesday ahead of the Organization of the Petroleum Exporting Countries and its allies, including Russia, (OPEC+) meeting this weekend where analysts do not expect any change to production policy. Energy stocks dropped lower along with oil Wednesday.
U.S. crude futures fell 2.2% to $67.90 a barrel Wednesday. Oil prices tumbled 4.4% on Tuesday.
The monthly loss in May for U.S. oil prices is currently around 11%. U.S. crude futures are now approaching 2023 lows amid concerns surrounding a slowdown in demand from top crude importer China. There is also uncertainty around Congress and the Biden Administration getting the deal to raise the debt ceiling across the finish line.
Meanwhile, OPEC+ is set to meet Sunday. However, analysts do not expect any policy change from the oil cartel.
The June 4 meeting follows OPEC+ deciding 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 hurting oil demand in 2023. 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.
OPEC+ Meets Sunday
After the April announcement, oil prices spiked to five-month highs. However, since then, U.S. oil has dropped lower. So far in 2023, oil and natural gas prices have dropped considerably vs. the 2022 levels, fueled by Russia's invasion of Ukraine, which drove sky-high oil prices and profits for oil producers.
Both Goldman Sachs and HSBC said Wednesday the oil cartel is unlikely to change oil production policy. OPEC already pumped less oil in April, due to supply disruptions in Iraq and Nigeria.
On Wednesday, Goldman Sachs said OPEC+ is unlikely to announce major changes to its oil production when it meets this weekend. The oil cartel will likely choose to wait to see the full impact of its recent cut and with oil prices falling sharply in recent days, the chance of OPEC+ making another production cut stands at around 35%, Goldman Sachs wrote.
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Energy Stocks, Respond To Oil Prices
Energy stocks fell Wednesday during market trade. Chevron stock fell 1.6% as Exxon Mobil stock slumped 1.7%.
Both Chevron and Exxon held annual shareholder meetings Wednesday. JPMorgan upgraded CVX to a "Neutral" rating from "Underweight" Wednesday. The firm also raised its Chevron stock price target to 170, up from the previous 161. JPMorgan believes CVX has "solid defensive characteristics in a market where defensiveness has become more important."
Meanwhile with OPEC+ set to meet this weekend, oil field services firms were also sent lower Wednesday. Halliburton and SLB dropped 3.4% and 3.3%, respectively. Baker Hughes shed 2%.
Energy stocks Diamondback Energy and Occidental Petroleum dropped 1.8% and 1.6%. Devon Energy slumped 1.9%. ConocoPhillips edged down 1.8% Wednesday.
Chevron stock ranks 11th in the Oil & Gas-Integrated industry group. CVX shares have a 53 Composite Rating out of 99. The stock has a 39 Relative Strength Rating, an exclusive IBD Stock Checkup gauge for share-price movement. The EPS rating is 65.
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