U.S. crude oil prices jumped 3.5% to $44.04 per barrel after plunging 6.7% on Christmas Eve. Brent crude oil prices rose 2.2% to $51.61 after undercutting $50 overnight.
Also supporting crude oil prices: The U.S. stock market opened higher, though energy stocks weren’t particularly strong.
Exxon Mobil (XOM) were up 0.1% on the stock market today. Fellow Dow Jones energy giant Chevron (CVX) climbed 0.5%. BP (BP) advanced 0.25%. Royal Dutch Shell (RDSA) climbed 0.25%. EOG Resources (EOG), a big U.S. shale producer, was flat.
One reason for the relatively muted gains for Exxon stock and other energy names could be that crude oil prices extended losses after U.S. stock markets closed at 1 p.m. ET on Christmas Eve.
Igor Sechin, head of Russia’s Rosneft and a close ally of President Vladimir Putin, said Wednesday that the drop in global crude oil prices was due to the Federal Reserve raising interest rates last week.
Crude Oil Prices Amid Global Economic Weakness
“The shock value of the price drop and the lack of confidence about the global economy will cause a sharp pullback in energy investment,” Phil Flynn, senior market analyst at Price Futures Group, wrote in his daily Energy Report.
He expects big capital spending cuts in 2019.
Oil companies “will have no choice even if they believe that this price crash is overdone, because the shareholders will not take too kindly to them if they are wrong.”
But if oil companies curb activity and the economy doesn’t perform as badly as the stock market suggests, then Flynn warns that oil prices could spike in 2019.
OPEC Crude Oil Production Quotas
Earlier this month, OPEC and its allies led by Russia, agreed to curb crude oil production by 1.2 million barrels per day starting in January. But the lack of detail raised concerns that participants could fudge any commitments to cut.
Last week, OPEC Secretary-General Mohammad Barkindo reportedly wrote to members urging them to release their quotas in an effort to support crude oil prices.
But the release seems to be delayed.
The letter also states that countries will reduce production by 3.02% to meet the 1.2 million-barrel-per-day cut, up from the 2.5% agreed on during the meeting.
The United States Oil Fund LP (USO) was trading at $9.47 per share on Wednesday morning, up $0.18 (+1.94%). Year-to-date, USO has declined -21.15%, versus a -11.22% rise in the benchmark S&P 500 index during the same period.
This article is brought to you courtesy of Investor’s Business Daily.