Market Overview

What The OPEC, OPEC+ Deal Means For Oil Investors

Share:
What The OPEC, OPEC+ Deal Means For Oil Investors

On Monday, OPEC reached a deal to extend its crude oil production cuts until March 2020. On Tuesday, Russia and nine other non-OPEC oil producers also reached a deal to cap oil production in an effort to support crude oil prices in a softening global manufacturing environment.

The Numbers

Production cuts from OPEC and non-OPEC partners — collectively referred to as OPEC+ — come in response to booming production growth in the U.S.

The U.S. has now surpassed both Russia and Saudi Arabia as the world’s biggest oil producer. As a result, the global market has become oversupplied, and OPEC+ has cut about 1.2 million barrels per day of production to support prices.

At the same time the U.S. is producing a record amount of oil, the JPMorgan Global Manufacturing PMI has dipped to its lowest level since 2012, a sign that oil demand could be slowing.

Analyst Reacts

Bank of America Merrill Lynch analyst Doug Leggate said in a note that the global oil environment is far from ideal for U.S. oil investors, but the market is already pricing in an extreme amount of pessimism when it comes to oil stocks.

“While still early, we believe industry commitments to capital discipline are really leaving the U.S. on the cusp of a transition to more measured growth that can coexist with OPEC and begin to address fragile market confidence that oil can be sustained above levels currently discounted across the U.S. oils,” he said Tuesday. 

U.S. unconventional oil growth is only about 180,000 bopd so far in 2019, the analyst said, adding that he expects U.S. onshore oil growth of 700,000 bopd in 2019 and again in 2020, but growth could slow to just 200,000 bopd in 2021.

Bank of America has named Hess Corp. (NYSE: HES) as its top U.S. E&P stock and Exxon Mobil Corporation (NYSE: XOM) as its preferred oil major play.

WTI crude oil prices fell 4.59% on Tuesday to $56.38/bbl following the OPEC news.

Bank of America isn’t expecting much of a rebound in the second half of the year, forecasting average fourth-quarter prices of around $56/bbl.

So far in 2019, the United States Oil Fund LP (NYSE: USO) is up 22.6% overall.

Related Links:

What To Expect From The S&P 500 Over The Next 20 Years

Options Traders Place Bets On Potential Oil Stock Rebound

Latest Ratings for HES

DateFirmActionFromTo
Dec 2019Initiates Coverage OnMarket Perform
Nov 2019DowngradesSector OutperformSector Underperform
Nov 2019MaintainsOverweight

View More Analyst Ratings for HES
View the Latest Analyst Ratings

Posted-In: Bank of America Merill Lynch Doug LeggateAnalyst Color News Commodities Top Stories Markets Analyst Ratings Best of Benzinga

 

Related Articles (USO + HES)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
ZYMEJP MorganInitiates Coverage On43.0
CWEBCompass PointInitiates Coverage On15.9
BZUNHSBCInitiates Coverage On41.5
ETNBBank of AmericaInitiates Coverage On33.0
ROOTJefferiesDowngrades
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

Cannabis Stock Gainers And Losers From July 2, 2019

Wedbush Reiterates Beazer Homes At Outperform