Oil and Gas E&P Stock prices movement after today’s OPEC meeting

Kuwait’s oil minister Mohammad Abdulatif al-Fares said on Monday that the OPEC member supports the plan to raise output, which would ensure adequate crude supply to balance the global market, state news agency KUNA reported.

Photo by Zbynek Burival on Unsplash

Iraq’s state oil marketing company, SOMO, said on Saturday that the OPEC member sees raising output as already planned was sufficient to meet demand and stabilize the market.

U.S. President Joe Biden on Saturday urged major G20 energy producing countries with spare capacity to boost production to ensure a stronger global economic recovery.

Brent crude prices were trading at near $85 a barrel on Monday, despite China announcing a release of fuel reserves to increase market supply and support price stability in some regions.

“Other than the potential for the market returning to surplus next year, the other factor holding back the group is the uncertainty over if and when Iranian supply could return to the market,” bank ING said on Monday.

E&P companies are known as price takers, which means they sell their oil and gas for the going market rate. That price point can fluctuate significantly, and it’s influenced heavily by changes in supply and demand. If oil producers pump more oil than the market needs, it can cause crude prices to plunge, which eats into the profitability of E&Ps.

Oil-field service companies, on the other hand, make money by providing services and equipment to E&P companies. While some service companies sign long-term contracts with E&Ps or other service providers that give them some revenue visibility, most operate under shorter-term contracts or sell products as needed. That can be problematic: Demand — and rates — for oil-field services, products, and equipment tends to ebb and flow with oil prices. That’s because E&Ps often base their capital spending on their anticipated cash flow, which also rises and falls with oil. As a result, oil-field service companies — especially pure plays — tend to be highly sensitive to oil prices.

Personal Opinion:

Due to different reasons and especially the possibility of return on Iran oil to the market after the possible negotiations of the revival of JCPOA, there is a chance that the rival countries like Iraq and Kuwait, would like to benefit from more share on oil export. This may lead to a conclusion of an increase in the supply of oil, which leads to decrease in oil price. in turn it may lead to reduction on the price of stocks like: Exxon, BP, Chevron, SLB and …