Crude oil futures are falling on Tuesday morning, dragging down most of the oil stocks in pre-market trading. WTI May delivery futures are off 3.72% and below $60 a barrel at 8 a.m. Eastern. Shares of Occidental Petroleum (NYSE:OXY) lead the group’s declines, with OXY stock off 4%.
The oil price drop — Brent crude futures were off by 1.24% to $63.90 per barrel — seems to be a reaction to plentiful supply just as fuel demand could slow due to new pandemic restrictions and lumbering vaccine rollouts in Europe.
“Global travel is still looking like it could be a while away,” Matt Stanley, a fuel broker at Star Fuels in Dubai, told Reuters, adding that a second-half recovery in oil demand looked doubtful as lockdowns remain the order of the day.
Oil Stocks React As Energy Nears Correction Territory
Signs are pointing to a correction in the energy sector, notably the Energy Select Sector SPDR Fund (NYSEARCA:XLE) down 9% from its March 12 high. Exxon Mobil (NYSE:XOM) is off 1.7% and Chevron (NYSE:CVX) is down 1.5% ahead of Tuesday’s market opening. Marathon Oil (NYSE:MRO) is down 3.5%.
Last week, the Paris-based IEA cut its forecast for crude demand in 2021 by 2.5 million barrels per day, while the EIA forecast global oil supply would surpass demand in the year’s second half, CNBC reported.
Meanwhile, analysts cited by Bloomberg said “Oil prices have overshot our above-consensus view this year, primarily to greater-than-expected caution by key suppliers, even as a gradual recovery in demand is underway.”
Ahead of the Easter holiday period, Germany put in place a hard lockdown and more restrictions through mid-April after the government said the country is in a “new pandemic,” dominated by the British Covid-19 strain.
On the date of publication, Robert Lakin did not have (either directly or indirectly) any positions in the securities mentioned in this article.
InvestorPlace contributor Robert Lakin is a veteran financial writer and editor, following fintech, agtech and property tech startups.