Chevron (CVX) and Exxon Mobil (XOM) fell along with other energy stocks on Wednesday as concerns over the SVB’s financial crash spilled over into the oil market. US oil prices fell to their lowest level since late 2021. CVX stock led Wednesday’s early losses among Dow Jones Industrial stocks.
US oil futures remained below $70 a barrel on Wednesday, falling to prices not seen since December 2021. West Texas Intermediate (WTI) prices fell to $67.50 a barrel, down 13% since the end of 2022. Meanwhile, Brent crude futures were trading around $76 a barrel, close to December levels 2022.
The drop in oil prices comes after the bankruptcy of SVB Financial late last week and Signature Bank of New York on Sunday raised concerns that other financial institutions could collapse. However, recent oil demand forecasts from the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) may provide some relief for some prices.
The Russian invasion of Ukraine in February 2022 caused oil prices to rise sharply. Futures fell in the latter part of the year, trading 43% below their June high on Wednesday.
Chevron shares fell 3.4% in market trading Wednesday. Exxon Mobil dumped 4%. Vendors also raided and dispatched oil field service providers Halliburton (HALL), SLB (SLB) and Baker Hughes (BKR) to losses in the range of 6%-9%.
OPEC and oil forecasts
On Tuesday, OPEC upheld its forecast for global oil demand growth in 2023. The oil cartel tempered optimism about China’s reopening of the economy with concerns about the US and Europe.
In its monthly market report, OPEC expects oil demand to grow by 2.3 million barrels per day in 2023 to 101.9 million barrels per day. Global oil demand totaled 99.8 million barrels by 2022. OPEC also raised its forecast for China’s oil demand growth for 2023.
On the supply side, Saudi Energy Minister Prince Abdulaziz bin Salman said OPEC+ will adhere to the production cuts agreed in October until the end of 2023.
Meanwhile, the International Energy Agency echoed an optimistic outlook for oil demand, pointing to a huge boost from resumed air travel and China’s economic reopening after the pandemic.
Chevron stocks, other stocks react to oil prices
Aviation and shipping inventories often rise when oil prices fall, because falls allow companies to make cheaper fuel price hedges. On Wednesday, however, shipping and aviation stocks were generally lower. Airlines had collapsed after a number of airlines issued mixed guidance updates on Tuesday.
Meanwhile, energy stocks showed some early premarket resilience on Wednesday, with Chevron, Exxon Mobil and others holding losses of up to about 2%. On the way to openness, sales picked up and losses deepened.
Shares of Chevron are now down almost 3% for March and are heading for a fourth straight monthly decline. Exxon is down 6% heading into its second monthly decline.
Diamondback energy (FANG) and Western (OXY) doped between 5%-7%. Devon energy (DVN) lost 6.4%.
ConocoPhillips (COP) fell 4.9% on Wednesday. On Monday, the Biden administration approved the Willow oil drilling project in Alaska’s Arctic.
This gives ConocoPhillips the green light to begin construction on its approximately $7 billion project in Alaska’s National Petroleum Reserve. COP expects the project to produce about 180,000 barrels of oil per day at its peak, equivalent to about 40% of Alaska’s current crude oil production.
Environmental groups have criticized Biden for the decision, saying he is going back on his climate protection promises.
Follow Kit Norton on Twitter @KitNorton for more coverage.
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