A painful day: energy stocks fell in price after oil prices plummeted
Shares of oil and oilfield services companies fell after oil futures fell in value / Photo: Smit / Shutterstock.com
Shares of energy companies in the United States and Europe fell in price on Wednesday: a truce in the Middle East removed a significant military premium built into oil prices, Reuters writes. They fell below $100 a barrel after the U.S. and Iran agreed to a two-week pause in hostilities and the opening of the Strait of Hormuz, through which more than 20% of the world's oil supply passes.
How did it affect the stock
Amid the decline in the cost of oil futures, shares of energy companies also began to fall in price: Exxon Mobil shares fell by 4.7%. On Wednesday, Exxon reported that disruptions in the work of its assets in Qatar and the UAE will lead to a decrease in global production in oil equivalent in the first quarter by 6% compared to the fourth quarter, reports MarketWatch. Chevron quotes fell 4.3%.
Shares of Occidental Petroleum and ConocoPhillips collapsed by 5%. Devon Energy, Diamondback Energy lost more than 4% of their value. Oil service companies and refiners also came under pressure.
Among the day's outsiders are also liquefied natural gas exporters, which benefited from high spot prices during the US-Israel conflict with Iran. Venture Global shares collapsed by almost 10% and Cheniere Energy by more than 3%.
Shell on Wednesday said its gas production will decline from the fourth quarter by a maximum of 7% due to a drop in production in Qatar, MarketWatch writes. The company's shares fell 4.2% in Amsterdam trading. The papers of other European players - TotalEnergies, BP, Eni and Repsol - were also under pressure in trading on Wednesday.
The European oil & gas sector turned out to be the worst performer: the STOXX Europe 600 Oil & Gas sectoral index fell by almost 2%. At the same time, it is still in plus by more than 30% since the beginning of the year.
What the analysts are saying
Analysts at Capital One Securities called the first day after the truce "harrowing" for companies in the exploration and production sector, as well as most energy-related securities.
"The initial market reaction has been significant, but sentiment will still depend on the news backdrop," Achilleas Georgolopoulos, senior market analyst at brokerage XM, said in an interview with Reuters. - Any sign that the cease-fire is hanging by a thread could quickly derail investors' improved risk appetite, and oil prices will be the first to react."
Volatility is likely to remain elevated while markets assess the progress of negotiations to end the war in the Middle East and the shipping situation, warned Ebury's head of market strategy Matthew Ryan.
During the pause in the conflict, investors will be able to examine how much damage has been done to infrastructure and the timeframe required to ramp up production, said Ashley Kelty, an analyst at Panmure Liberum.
What's happening in the Strait of Hormuz
According to vessel tracking service MarineTraffic, the first ships passed through the Strait of Hormuz on Wednesday, but more than 12 hours after the truce began, overall traffic remained low, CNBC noted. Hundreds of vessels were still in the region, including 426 tankers and 19 LNG carriers. At the same time in the middle of the day Iranian news agency Fars reported that Iran stopped the passage of tankers through the strait because of Israeli attacks on Lebanon. Only two ships managed to use the truce at that time, the agency reported.
This article was AI-translated and verified by a human editor
