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One of Newton’s laws of big-oil physics boils over.
Historically, when oil prices rise, major oil companies rise with them. But as oil prices rose amid the US-Israel conflict with Iran, shares of major oil companies fell sharply. Consider this a sign of the sheer scale of the conflict in the Middle East, and the unprecedented coordinated response it has elicited from the world’s energy leaders.
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Oil prices fell on Tuesday, after rising above $100 a barrel earlier this week. U.S. crude oil prices fell nearly 8% for the day by Tuesday afternoon, falling to around $86 a barrel, while global benchmark Brent crude fell by the same amount to around $91 a barrel. But rates have remained significant, around 26%, since the start of the war.
However, the usual increase in major oil stocks is observed. For example, Chevron’s shares have fallen slightly since the start of the war, and Exxon’s are down nearly 3%. While the unusual separation is largely due to fears of how the conflict could shake up oil industry operations in the Middle East, a few underlying factors are also at play:
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Surprisingly, each of the five major oil companies has a significant share of production in the region; According to TD Cowen estimates seen by Barron’s, a full 27% of TotalEnergies’ supply chain is exposed to the region, followed by 18% for BP, 16% for Exxon, 13% for Shell and 4% for Chevron.
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Some traders see a parallel to the 2008 surge and a possible fall in oil prices if the war continues and threatens supplies. “Oil stocks hit around $100 in 2008 following the oil crash (in 2008), then almost completely collapsed as it hit $147,” David Hewitt, senior consultant at Hewitt Energy Prospects, told Reuters. “The market was right then – $147 per barrel quickly went to $30.”
Meanwhile, leaders of more than 30 member countries of the International Energy Agency met on Tuesday to consider selling the nearly 1.2 billion barrels of oil they collectively hold in storage, a move that could further stabilize oil prices. Officials have proposed the largest release of reserves in the organization’s history, even surpassing the 182 million barrels released after Russia’s invasion of Ukraine in 2022, and members may decide on it today, the Wall Street Journal reported.
(TagsToTranslate)oil prices
