Energy stocks were the best-performing stocks in London as investors cheered the latest crude oil news. Harbour Energy, Ithaca Energy, Tullow Oil, and Energean were the best-performing stocks in the mid-cap FTSE 250 index. Similarly, Shell (LON: SHEL) and BP (LON: BP) rose by more than 4%, making them the best FTSE 100 performers.
Crude oil price jumps
Energy stocks have started the second quarter of the year well. These stocks jumped sharply after the surprise decision by the OPEC+ cartel to slash oil production by 1 million barrels per day. Russia and Saudi Arabia will each slash production by 500k barrels per day. Other countries like Kuwait, Iraq, and the United Arab Emirates (UAE) will also slash production by thousands of barrels per day.
The cartel decided after observing the performance of oil prices in the first quarter of the year. In this period, Brent, the global benchmark, dropped to the lowest levels since 2021. For most of the quarter, oil prices remained in a consolidation phase as concerns about demand and supply remained.
Investors cheered the latest decision by the cartel. Brent jumped by 5% to $54.30 while the West Texas Intermediate (WTI) rose to $80. This happened as traders adjusted their outlook for oil prices.
However, the decision to slash oil production could be a sign that these countries are concerned about demand. As I wrote in this article, Nigeria, a leading African producer, is struggling to find buyers as protests in France continued.
There are also concerns that China is not recovering as fast as most analysts were expecting. For example, data published on Monday showed that China’s manufacturing PMI declined to 50 in March.
Oil stocks jump
Energy stocks in the FTSE 100 and FTSE 250 have been some of the top laggards in 2022. Shell share price has dropped by 7.7% from its highest level this year. Similarly, BP stock has dropped by over 6% from the year-to-date high. The two companies have made headlines by starting to sideline their clean energy products.
Smaller energy companies have been in a worse situation. Tullow Oil shares have slipped by 33% from the highest point in 2022. As I wrote last week, Tullow share price formed a falling wedge pattern, which is usually a bullish sign. Ithaca Energy stock has dropped by over 33% from its highest point in 2022.
The performance of these stocks will depend on the trends in the oil market this year. Despite the jump, there is a possibility that the price will struggle because of the substantial oil production trends in the United States.
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