Invest In Oil Stocks (XOM CVX OXY) Now? Errh...
Looks like this week’s quarterly earnings (see above) and Mon, 04 Sep Labour Day holiday did not re-charge the US market.
Perhaps the drawback is “good”?
Afterall 3 major indexes were coming off a winning (last) week that saw the S&P 500 booked its best weekly performance since June.
All thanks to the unwavering stream of economic (mostly positive) updates, see below, feeding hopes that the Fed would hold off interest hike in September.
US Market tanked towards the end of trading day (see below).
DJIA: -0.56% (-195.74 to 34,641.97).
S&P 500: -0.42% (-18.94 to 4,496.83).
Nasdaq: -0.08% (-10.86 to 14,020.95).
I feel focus is shifting away from corporate earnings back to the Fed as this week & next forms the prelude to FOMC meeting, scheduled for 19-20 September.
Will it continue its downwards spiral today - that is the question.
Rightfully, the market should have been buoyant, given that for the third time in as many months $Goldman Sachs(GS)$ has reduced the probability of US economy slipping into a recession come 2024. (see below).
On Mon, 04 Sep 2023, Goldman Sachs Chief Economist - Mr Jan Hatzius in a note to clients entitled "Soft landing summer" shared that there was a 15% chance of a recession in the next 12 months.
This was down from an earlier July 2023 forecast of 20%.
Main attributes were due to (a) continual positive inflation data (see above table again) & (b) a cooling labour market news, leading to Goldman Sachs cutting its estimated 12-month US recession probability.
Both Mr Hatzius & Goldman Sachs see the US economy growing at a 2% annual pace on average through the end of 2024.
Interestingly, Goldman Sachs’ prediction is considered “conservative” (see above), compared to Bloomberg, forecasting the probability stands at 60%.
That is a bit “too optimistic” right?
“Real” gainers in yesterday's trading are actually Oil sector stocks, thanks to above confirmation (see above).
When I read the above news article, I thought to myself - would it have made a difference, had both Saudi & Russia confirmed the additional cut of 1 Million bpd (announced in July 2023) would last until year end?
Wouldn’t that have a “greater impact and drive oil price up, up, up” versus The Kingdom’s approach of saying that it would last for one month initially, then another month and finally now until year end?
On Tue, 05 Sep, oil jumped to 10-month high after Saudi Arabia & Russia (as key OPEC+ members) announced supply reductions in a bid to keep crude prices high.
Both Brent International and West Texas Intermediate futures closed higher respectively at $90.04 and $86.69 per barrel for the first time since November.
The Kingdom & Russia’s voluntary cut is in addition to OPEC+ group reductions that started in November 2022.
Will Oil Stock Cont’d To Rally?
Above are the Top 5 oil stocks by market capitalization - $Exxon Mobil(XOM)$ , $Chevron(CVX)$ , $ConocoPhillips(COP)$ , $Phillips 66(PSX)$ and Mr Buffett’s favourite Occidental Petroleum (OXY).
Looking at the respective oil stock’s closing price, not every oil benefitted.
Equally interesting, the pre-market indicators have forecasted all Top 5 stocks will experience a correction on Wed, 06 Sep 2023 (see above), when trading resumes.
Honestly, they are hovering closed at their YTD highs.
Brutally, there is very little upside to above oil stocks’ prices.
Not unless oil price breaks through the $90 per barrel resistance level and stays above or trend even higher, don’t see how oil stocks will soar even higher in the near term.
Do not forget, oil and gas sector tend to be cyclical due to their dependence on global demand.
Meaning, investors would get to experience the booms & busts of an economic cycle when investing in the oil and gas sector.
Will oil stock continue to rise today? Its still to be seen.
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Do you think US market will turn for the better (green!) today?
Do you think now would be a good time to pick up some oil stocks now that its confirmed that supply will be in the short until end December 2023 ?
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With oil prices so high and surely to go higher CVX should be higher. Looking to new high before end of year.