By Brian Swint
Oil prices fell sharply on Monday after the Organization of the Petroleum Exporting Countries said it would increase production next month.
Futures are now trading below $60 a barrel at levels not seen since the depths of the Covid-19 pandemic in February 2021. Increased supply from OPEC and the economic uncertainty of trade wars weighing on demand could be a brutal combination for energy prices.
Analysts at Goldman Sachs say a further OPEC output increase could come in July. They expect West Texas Intermediate, the U.S. benchmark, to average $56 a barrel the rest of the year and $52 in 2026. It was down 1.3% at $57.54 early Monday.
That's going to put pressure on Big Oil firms like Exxon, Chevron, Shell, and BP, whose profits rise and fall in line with crude prices. London-based BP in particular may be vulnerable because of its relatively high debt load. A report over the weekend said that Shell is studying the merits of bidding for its cross-town rival, and activist investor Elliott Management has built up a 5% stake in BP.
BP American depositary receipts jumped 2.6% in premarket trading Monday -- the London market is closed for a holiday. Shell ADRs were down 1.5%
Shell CEO Wael Sawan shrugged off questions about any acquisitions at the company's earnings on Friday, saying it probably makes more sense to buy back more Shell shares. On Monday, a spokesperson for Shell said that "we are sharply focused on capturing the value in Shell through continuing to focus on performance, discipline and simplification."
A spokesperson for BP declined to comment on the report.
U.S. rivals may be in a better position to weather the storm. In its earnings Friday, Exxon CEO Darren Woods said "we're built for this."
Exxon stock slipped 1.3% in Monday's premarket, while Chevron retreated 1%. Futures for the S&P 500 fell 0.9%.
Brent crude, the international oil standard, was down 1.2% at $60.57 a barrel. It has declined almost 30% this year.
Write to Brian Swint at brian.swint@barrons.com
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May 05, 2025 08:06 ET (12:06 GMT)
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