Amid fears of an imminent global recession, oil stocks and oil prices are declining meaningfully today. Investors are worried that a global economic contraction would cause demand for oil to shrink.
Citi is predicting that oil prices could tumble to $65 per barrel in 2022 if a recession materializes, Barron’s reported today. The price of West Texas Intermediate oil has fallen more than 7% to just more than $100 so far this morning.
The uptake of commodities are usually much weaker during recessions, Citi noted. While Citi itself doesn’t expect a recession to occur this year, many other firms, including Morgan Stanley and Deutsche Bank, do anticipate such a development.
Near-Term Factors May Weigh on Oil Stocks
The Organization of the Petroleum Exporting Countries (OPEC), along with Russia, may announce increases in its exports in the near-term. Additionally, President Joe Biden’s trip to Saudi Arabia, slated to take place next week, may result in the country committing to increasing its petroleum output.
Meanwhile, Russian oil producer Rosneft disclosed yesterday that it had uncovered a new oil deposit with 82 million tons of petroleum. Although Europe is weaning itself off Russian oil, India and China are still buying it from the country.
Brent Oil Prices and Oil Stock Prices
The price of Brent oil has so far fallen more than 8% to about $104 this morning. In mid-morning trading, Exxon Mobil (NYSE:XOM) dropped 4.4% to $83.70 and Chevron (NYSE:CVX) gave back 4.4%, falling just below $140. BP (NYSE:BP) retreated 6% to less than $27, and Occidental Petroleum (NYSE:OXY), in which renowned investor Warren Buffett has a major stake, sank 5.5% to $57.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.