Billy Duberstein, The Motley Fool
5 min read
In This Article:
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OPEC+ increased supply in line with expectations, leading to a relief rally in oil prices.
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In addition, Ukraine's daring attack on Russia's long-range bomber fleet increased fears of a geopolitical incident that could further limit Russian oil supply.
Shares of major international oil and oil-related stocks such as TotalEnergies (NYSE: TTE), APA (NASDAQ: APA), and oil tanker company Torm plc (NASDAQ: TRMD) rallied on Monday, with the stocks up 2.6%, 4.4%, and 3.4%, respectively, as of 12:45 p.m. ET.
TotalEnergies has made strides to become more diversified into renewables, but it still gets over half its operating income from oil and gas upstream production. APA is primarily an upstream oil and gas explorer. And Torm is an oil and gas tanker company involved in global oil and gas transport.
Today, oil and gas prices had a "relief rally," as the past weekend's OPEC+ cartel announcements of supply increases weren't as large as feared. Furthermore, Ukraine's daring strike against Russia's bomber fleet over the weekend could potentially escalate the war with Russia, throwing into question Russia's supply on the markets once again.
Over the weekend, the OPEC+ cartel announced it would increase oil supply for the month of July by 411,000 barrels per day, an amount in line with expectations. Going into the weekend, some had feared OPEC+ would announce a larger increase.
The OPEC+ countries had agreed to voluntary cuts in the neighborhood of 2.2 million barrels per day in January 2024 in order to support oil prices amid stalling growth and growing U.S. production. But in April, the cartel announced it would phase out those voluntary cuts, despite oil prices having fallen this year. While some had feared a bigger surge of production more quickly, it appears the cartel will be phasing in those supply increases more gradually.
Additionally, oil prices can surge higher whenever there are geopolitical tensions in oil-producing states. In today's case, it's Russia. We all remember the big surge in oil prices back in 2022, in the aftermath of Russia's invasion of Ukraine. While oil prices have come down this year on the back of tariff-related fears, and perhaps the Trump administration's more Russia-friendly stance leading to sanction relief, Ukraine's daring strike on Russia's long-range bomber fleet this past weekend has raised the prospect of a bigger Russian response.
