Shares in energy producers flowed higher today as fears that the OPEC+ group of nations would turn on the taps and flood the market with oil were proved to be misplaced.
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Brent crude climbed 1.7% to $67.13 a barrel in early trading, while U.S. West Texas Intermediate crude rose $1.09, or 1.8%, to $62.96 a barrel.
Modest OPEC+
The increase came after the OPEC+ group, which includes the Organization of the Petroleum Exporting Countries plus Russia and other allies, agreed on Sunday to further raise oil production from October.
The members of OPEC+ will lift production from October by 137,000 barrels per day. That, however, is much lower than increases of about 555,000 bpd for September and August and 411,000 bpd in July and June.
Indeed, the amount announced was less than initially feared by analysts. In addition, the possibility of more U.S. sanctions on Russian crude as a result of its intensifying attacks on Ukraine, despite the recent moves to secure a peace deal in the conflict, also helped prices.
Too much supply, allied to still weak demand given fears over economic volatility both in the U.S. and abroad could have sent the oil price even lower this year.
“The market had run ahead of itself in regards to this OPEC+ increase,” said Ole Hansen, head of commodity strategy at Saxo Bank. “Today we’re seeing a classic sell the rumour, buy the fact reaction.”
OPEC+ has been increasing production since April after years of cuts aimed at supporting the oil market. The latest decision comes despite a likely looming oil glut in the Northern Hemisphere this winter.
Stock Reaction
Shares in oil majors such as BP (BP), up 0.9% in pre-market trading and Shell (SHEL) up 0.8%, flowed higher.
U.S. energy firm Exxon Mobil (XOM) was up 0.6%, ConocoPhillips (COP) was up 0.8% and Diamondback Energy (FANG) rose 0.5%.
These companies, as reported by the Wall Street Journal, have been helped this year by President Trump’s support for the fossil fuel industry. However, it hasn’t shown up in their share price over the last few months – see below:
Trump’s “One Big Beautiful Bill” ended tax credits for electric vehicles and added tax cuts for fossil fuel companies. He has also moved to block offshore wind projects in the U.S.
The WSJ said executives such as Exxon CEO Darren Woods have spoken directly to Trump over the phone since his return to office and met with Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick, multiple times since January.
Oil prices remain low given that they were at $76 back in 2017 and tariff costs on steel have hiked drilling costs, thus hitting investor sentiment. But, according to the WSJ, the oil producers see this as short-term pain for a long-term gain.
It is the era of ‘Drill, Baby, Drill’ after all.
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