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July 7, 2022, 6:13 a.m. EDT

Should You Buy The Oil Price Dip?

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Jul 07, 2022 (Baystreet.ca via COMTEX) -- Oil prices nosedived alongside the broader market on Tuesday, with U.S. crude dipping to the psychologically important level of $100/bbl as growing recession fears coupled with concerns over weakening demand outweigh a fundamentally tight supply market. WTI crude tumbled 8.2% to $99.50/bbl, the lowest since April 25 and the first close below the $100/bbl level in more than a month. At one point, WTI crumbled more than 10% to trade as low as $97.43. Meanwhile, front-month Brent crude fell by even more, losing 9.4% to $102.77/bbl, its lowest settlement since May 10.

"A growing number of analysts are expecting that many of the world's leading economies will suffer negative growth in the next few months, and this will drag the U.S. into a recession," Fawad Razaqzada, market analyst at City Index, has told Bloomberg.

"In the very near term, the Dow & S&P will have a major factor on crude direction as recession fears remain," BOK Financial's Dennis Kissler has told Bloomberg. He has also voiced concerns that fuel demand could "drop significantly now that the 4th of July holiday is behind us."

A brawny dollar has also not been helping oil and commodity prices as the leading currency continues to be the world's preferred safe haven during these turbulent times.

"Capital flooding into U.S. dollars, which has sent [the dollar] soaring... appears to be putting a headwind in front of commodity prices," Colin Cieszynski, chief market strategist at SIA Wealth Management, has told MarketWatch.

Not surprisingly, energy stocks are getting hammered in the latest selloff, with Halliburton Company /zigman2/quotes/210488727/composite HAL +1.93% -8.1%, APA Corporation /zigman2/quotes/200648444/composite APA +2.64% -7.4%, ConocoPhillips /zigman2/quotes/207605056/composite COP -0.44% -6.9%, and Hess Corp. /zigman2/quotes/203832174/composite HES +0.35% -6.8% the biggest decliners.

Citi analysts have warned that crude prices could collapse to $65/bbl this year in the event of a recession. The experts say that oil prices could plunge even lower to $45 in another year as supplies hold up, but a global economic slowdown causes demand to decline.

Luckily for the bulls, the bank has placed a mere 10% probability on this outcome.

Still, Citi clearly belongs to the bear camp and has assigned a 50% likelihood that Brent crude will drop to $85/bbl by the end of 2022.

Limited downside

/zigman2/quotes/210488727/composite
US : U.S.: NYSE
$ 23.76
+0.45 +1.93%
Volume: 12.77M
Sept. 27, 2022 4:00p
P/E Ratio
14.90
Dividend Yield
2.02%
Market Cap
$21.14 billion
Rev. per Employee
$437,375
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/zigman2/quotes/200648444/composite
US : U.S.: Nasdaq
$ 32.68
+0.84 +2.64%
Volume: 10.51M
Sept. 27, 2022 4:00p
P/E Ratio
3.68
Dividend Yield
3.06%
Market Cap
$10.40 billion
Rev. per Employee
$4.47M
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/zigman2/quotes/207605056/composite
US : U.S.: NYSE
$ 98.76
-0.44 -0.44%
Volume: 8.78M
Sept. 27, 2022 4:00p
P/E Ratio
8.13
Dividend Yield
1.86%
Market Cap
$126.28 billion
Rev. per Employee
$4.65M
loading...
/zigman2/quotes/203832174/composite
US : U.S.: NYSE
$ 101.09
+0.35 +0.35%
Volume: 1.98M
Sept. 27, 2022 4:00p
P/E Ratio
21.44
Dividend Yield
1.48%
Market Cap
$31.19 billion
Rev. per Employee
$6.24M
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