Even with the broader stock market in the red this morning, oil stocks representing Exxon Mobil (NYSE:XOM), Occidental Petroleum (NYSE:OXY) and Indonesia Energy (NYSEAMERICAN:INDO) were definitely in rally mode. Most likely, this is because the Organization of the Petroleum Exporting Countries (OPEC) Plus met today in Vienna, Austria and announced cuts to oil production. So, prepare for higher prices at the pump and also potentially in some oil stocks.
Many Americans were undoubtedly shocked when the per-gallon price of gasoline rose to $5 in some cities. Eventually, however, it backed down to around $3.50 or even lower than that.
Yet, gasoline prices are a function of many factors and can easily head back toward $4 or higher. Among those factors is the power that OPEC Plus nations have to increase or reduce their oil production and exports.
Hence, financial traders are watching oil stocks closely, as OPEC Plus announced it will cut oil production by two million barrels per day.
What’s Happening with Oil Stocks?
There’s typically a direct correlation between petroleum prices and oil stocks. So, it shouldn’t be too shocking that the share prices of Exxon Mobil, Occidental Petroleum and Indonesia Energy are up today.
This is happening even while the broader stock market is firmly in the red. It just goes to show how influential OPEC Plus nations can be on the prices of certain energy stocks.
How much of an impact will the production cut have? If the world uses up to 100 million barrels of oil per day, cutting back two million barrels of supply will likely be quite disruptive.
In response to these dynamics, OXY stock moved up slightly this morning. Meanwhile, XOM stock rallied 3% and INDO stock soared 14%. Clearly, traders are anticipating windfall profits for these energy firms. This wouldn’t necessarily be great news for American gasoline consumers, but today it’s certainly a tailwind for oil stocks.
On the date of publication, David Moadel 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.