Oil futures have been on a largely steady march upwards for much of 2023 baring periods of cyclical volatility. However, that hasn’t necessarily translated into a similarly spectacular stock price appreciation for major crude explorers and producers.
Given the recent tightness in the oil market and a significant risk premium triggered by fears of an escalation in the Middle East, both the global proxy benchmark Brent as well as the U.S. West Texas Intermediate (WTI) are north of $90 per barrel, at $93.31 and $90.34 respectively (11:03 EDT on October 20, 2023).
That gives the market a 2023 year-to-date (YTD) price appreciation of 18% for Brent and 17% for WTI as the current trading week draws to close. While the crude price uptick has resulted in ‘Big Oil’ stock price gains, the picture is decidedly mixed.
For instance, U.K. oil majors Shell (LON: SHEL) and BP (LON: BP) have posted stock price upticks of 15.3% and 13.25% respectively for the year to October 20, 2023, with Aramco (TADAWUL: 2222) – the world’s largest oil company by market capitalization – offering a YTD gain of 13.75%.
But gains among their peers are more muted. For instance, ExxonMobil
XOM
(NYSE: XOM) stock has posted gains of 3.41% YTD, while Chevron (NYSE:CVX), which saw solid gains in 2022, is actually down -3.71%. The U.S. peer ConocoPhillips
COP
(NYSE: COP) has clocked a near 9% YTD gain.
European majors TotalEnergies and Eni have seen gains of 4.8% and 12.6% respectively, while Equinor has entered Q4 2023 broadly near its stock trading levels at the start of the year.
However, the year is not out yet and there could be room for further upside. An easy end to the ongoing Middle East crisis doesn’t appear to be on horizon. Similarly, Saudi Arabia and Russia’s ongoing oil production cuts of 1.3 million barrels per day have been extended to the end of the year keeping the market tight.
It means the oil price will likely touch $100 extending the windfall of oil majors for the remainder of 2023. And by default, raise the prospect of further stock price gains. However, whether those gains will last into 2024 is an entirely different matter, with some form of oil price correction likely around the second half of 2024 based on pricing levels of futures contracts 6-months out and beyond.
Disclaimer: The above commentary is meant to stimulate discussion based on the author’s opinion and analysis offered in a personal capacity. It is not solicitation, recommendation or investment advice to trade oil and gas stocks, futures, options or products. Oil and gas, and equity markets can be highly volatile and opinions in the sector may change instantaneously and without notice.
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