Crude oil futures ended Friday at their lowest level in three weeks, capping the largest weekly declines since October for WTI and Brent, which faltered after settling at their best levels since November on Tuesday.
America’s energy twin towers, Exxon Mobil (XOM) and Chevron (CVX), reported better than expected Q4 earnings and posted their second-highest annual profits in a decade last year – $36B and $21.4B, respectively – down more than a third from record levels in 2022 but still well above historic averages.
Both companies said they plan to aggressively ramp up production from the Permian Basin this year, a potential early sign that U.S. oil output may exceed expectations in 2024 as in 2023, Bloomberg reported.
Chevron (CVX) said it is targeting 10% growth in the Permian this year, which would set it on pace to pump 1M bbl/day from the region in 2025; “Our growth is higher likely than the basin average but it is representative of our activity level and the activity level of our partners,” CFO Pierre Breber told Bloomberg.
Exxon’s (XOM) Permian production jumped 12% in 2023, exceeding its 600K bbl/day guidance, and the company will become far and away the basin’s biggest producer once it completes its purchase of Pioneer Natural Resources by mid-year; excluding Pioneer, Exxon plans a nearly 7% boost to 650K bbl/day this year.
Front-month Nymex crude (CL1:COM) for March delivery fell 2.1% on Friday to $72.28/bbl, and front-month April Brent crude (CO1:COM) slipped 1.7% Friday to $77.33/bbl; for the week, WTI -7.3% and Brent -6.8%, the largest one week net and percentage declines for both benchmarks since early October.
ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO),(USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI)
A strong U.S. jobs report that lowers the likelihood of March interest rate cuts from the Federal Reserve, continued economic headwinds in China and the possibility of some easing of tensions in the Middle East all contributed to reduce crude prices this week.
Monday’s trading could be affected by late Friday’s U.S. airstrikes launched against Iranian-backed militias in Syria and Iraq, in response to the drone attack that killed three American soldiers.
J.P. Morgan analysts still see oil heading for the high $80s, forecasting a 1.5M bbl/day increase in global oil demand this year, above client consensus view closer to ~1M bbl/day.
“We believe the lows are behind us and continue to see Brent trading in high $80s by May, with a distinct possibility of crude overshooting our price target to the upside,” the bank said, noting its “constructive outlook relies heavily on our optimistic view on demand, especially China.”
The Energy Select Sector SPDR ETF (XLE) closed the week -0.9%.
Top 5 gainers in energy and natural resources: Plug Power (PLUG) +37%, Ur-Energy (URG) +14.8%, Nuscale Power (SMR) +14.5%, Brooge Holdings (BROG) +11.1%, NexGen Energy (NXE) +10.3%.
Top 10 decliners in energy and natural resources: Meta Materials (MMAT) -41.6%, Sigma Lithium (SGML) -25.8%, Piedmont Lithium (PLL) -22.2%, SandRidge Energy (SD) -19.7%, Borr Drilling (BORR) -18.8%, NOV (NOV) -16%, W&T Offshore (WTI) -14.4%, Weatherford International (WFRD) -13.8%, Montauk Renewables (MNTK) -13.6%, Nine Energy Service (NINE) -13.4%.
Source: Barchart.com
