Why Are XOM, OXY, DVN Oil Stocks Down Today?

Why are oil stocks down today? Well, it surely doesn’t help that the S&P500 is down more than 2% so far in Friday’s session and crude oil prices are down almost 6%. This impact is being felt throughout the energetic space today and this week.

For example, the Energy Select Sector SPDR ETF (NYSEARC:XLE) is down 7% on the day. It’s on track for its worst one-day loss since May 9, when it fell 8.4%, and is now down 10.3% for the week. Moreover, the SPDR S&P Oil & Gas Exploration & Production ETF (NYSEARC:XOP) is down 8.4% on the day.

Specifically, Exxon Mobil (NYSE:XOM) is down 5.7% on Friday and 19.6% off its peak. With a market capitalization of $356 billion, Exxon is the largest energy company in the United States.

Warren Buffett’s Favorite western oil (NYSE:OXY) is down more than 5% today and almost 9% for the week. It reached its lowest level since August 9. Finally, Devon Energy (NYSE:NDV) is down nearly 10% on the day and more than 15% this week.

However, to answer the question, “Why are oil inventories down today?” We have a somewhat complex answer.

So why are oil stocks down today? Three reasons

We have moved from worrying about a shortage of energy supply to worrying about a drop in demand due to a global recession.

While everyone fears a recession, oil prices are at their lowest since January. WTI crude has not traded below $80 since Jan. 11 and earlier in the day hit a session low of $78.04.

Oil prices peaked at $130.50 in early March. At current prices, oil is down more than $52 a barrel, a whopping 40%.

In addition to falling energy prices, the soaring US dollar is acting as a headwind for both oil prices and equities. As the Federal Reserve continues to raise interest rates, the dollar continues to strengthen. A strong dollar is negative for commodities and it shows today as oil, natural gas, copper, gold and other assets sink.

For what it’s worth, the dollar index is at 20-year highs.

So essentially it’s more than just a supply imbalance or a lack of demand. It is concerns about the global economy and the rising dollar that are driving down oil and energy prices. And if that wasn’t enough, finally, we have falling stock prices. The S&P 500 is less than 1% from its 2022 low as the bear market rumbles and spares no sector yet.

As of the date of publication, Bret Kenwell had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to publishing guidelines.


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