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On Friday, crude oil futures concluded at their lowest level in three weeks, marking the most substantial weekly decreases for WTI and Brent since October. The faltering occurred after the settlement of WTI and Brent at their highest levels since November last Tuesday.
Robust Q4 Earnings and Growth Aspirations
America’s energy juggernauts, Exxon Mobil (XOM) and Chevron (CVX), disclosed Q4 earnings that exceeded expectations and reported their second-highest annual profits in a decade, boasting $36 billion and $21.4 billion, respectively. Although these figures represented a decline of more than a third from the record levels reached in 2022, they still surpass historic standards.
Chevron revealed plans to significantly increase production from the Permian Basin this year, setting the stage for a potential early indication that U.S. oil output might surpass expectations in 2024, much like it did in 2023 as per Bloomberg’s report. The company stated a target of 10% growth in the Permian this year, aiming to reach a capacity of pumping 1 million barrels per day from the region by 2025.
Exxon’s Permian production surged by 12% in 2023, surpassing its guidance of 600,000 barrels per day. Moreover, upon completing the acquisition of Pioneer Natural Resources by mid-year, the company aims to become the dominant producer in the basin. Excluding Pioneer, Exxon plans a nearly 7% boost to reach 650,000 barrels per day in 2024.
Market Dynamics and Outlook
Front-month Nymex crude (CL1:COM) for March delivery experienced a 2.1% decline on Friday, amounting to $72.28 per barrel, while front-month April Brent crude (CO1:COM) slipped 1.7% to $77.33 per barrel. This led to a weekly decline of 7.3% for WTI and 6.8% for Brent, marking the most substantial one-week net and percentage declines for both benchmarks since early October.
A strong U.S. jobs report, reduced likelihood of March interest rate cuts from the Federal Reserve, ongoing economic challenges in China, and the potential easing of tensions in the Middle East all contributed to the decline in crude prices this week.
Monday’s trading may be influenced by late Friday’s U.S. airstrikes against Iranian-backed militias in Syria and Iraq in response to a drone attack that claimed the lives of three American soldiers.
J.P. Morgan analysts hold the belief that oil is heading for the high $80s, projecting a 1.5 million barrels per day increase in global oil demand this year, surpassing the client consensus view of approximately 1 million barrels per day. The bank emphasized its “constructive outlook reliant on optimistic demand, especially in China.”
Stock Market Impact
The Energy Select Sector SPDR ETF (XLE) closed the week with a 0.9% decline.
In the energy and natural resources sector, the top 5 gainers included Plug Power (PLUG) with an impressive gain of 37%, Ur-Energy (URG) at +14.8%, Nuscale Power (SMR) at +14.5%, Brooge Holdings (BROG) at +11.1%, and NexGen Energy (NXE) at +10.3%.
On the flip side, the top 10 decliners in the energy and natural resources sector featured Meta Materials (MMAT) with a substantial decline of 41.6%, Sigma Lithium (SGML) at -25.8%, Piedmont Lithium (PLL) at -22.2%, SandRidge Energy (SD) at -19.7%, Borr Drilling (BORR) at -18.8%, NOV (NOV) at -16%, W&T Offshore (WTI) at -14.4%, Weatherford International (WFRD) at -13.8%, Montauk Renewables (MNTK) at -13.6%, and Nine Energy Service (NINE) at -13.4%.
Source: Barchart.com
