Oil Stocks Are Selling Off After This OPEC Commentary

• Shares of Whiting Petroleum Corp WLL, Linn Energy LLC LINE, Comstock Resources Inc CRK, Southwestern Energy Company SWN, Oasis Petroleum Inc. OAS and several other oil and gas stocks fell more than 5 percent on Friday trading.
• Traders were attributing the tumble to a ~2 percent decline in oil prices, triggered by OPEC officials questioning bullish 2016 forecasts.
• Although oil prices recuperated slightly in the afternoon, the shares closed in red.

Oil was falling on Friday trading as the U.S. Dollar hit an eight-month high and Chinese equities dropped, adding further pressure to already oversupplied crude futures, a Reuters article explained.

Moreover, analysts expect oil trading to be more cautious next week, in anticipation of the policy meeting of the Organization of the Petroleum Exporting Countries (OPEC), which will take place on Friday.

“While OPEC is expected to stick to high output levels to defend market share, traders and investors are wary of recent comments by top crude exporter Saudi Arabia that it was open to working on price support measures with other oil producers,” the note expounded.

However, some OPEC officials questioned the organization’s researchers’ optimistic demand forecast. Apparently, the policymakers are feeling skeptical about “a quick easing by 2016 of the global supply glut in oil.”

In fact, last week, Venezuelan Oil Minister Eulogio Del Pino assured oil prices could fall to the mid-$20s a barrel if the market does not stabilize soon. However, none of the OPEC countries seems to be willing to cut down on its output: economies have to keep running. However, the largest producer in the world, Saudi Arabia, said it was willing to take the measures necessary to stabilize the market. But, is the country actually willing to trim production?

Kim Woo Kyung, a spokeswoman for SK Innovation Co., the largest refiner in South Korea stated, “This is probably the best time we’ve ever had as a buyer (…) We are enjoying an overflow of oil.”

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.