Oil majors are still stuck on the sidelines as Iran's war increases oil prices.
Oil prices rose to their highest level since 2022 on Monday, but the shares of major producers such as Shell and Exxon Mobil are still only seeing modest gains'since the U.S. - Israel war on Iran 'broke out last month. This suggests that traders believe the pain in the market could be temporary.
The iShares Global Energy ETF, which tracks global energy companies, is up about 2%. Crude oil futures are up more than 40% since Israel launched its joint airstrikes with the U.S. on February 28. This suggests that any gains made from higher prices are temporary or will be offset by lower production.
James West, Melius Research's head of energy and electricity research, said that the market expects a rapid end to the Strait of Hormuz closure and a collapse of oil prices back to normal levels. The rally in oil prices has largely been contained to short-term spot prices rather than crude oil futures with a longer time horizon.
Brent crude futures, and U.S. West Texas Intermediate Crude futures, rose around 30% at the start of the week as the war against?Iran disrupted traffic in the Strait of Hormuz and oil and natural-gas exports from Middle East, and forced production stops.
Brent's 6-month delivery contract also hit an all-time record high of around $36 per barrel, which indicates a tightening supply in the near term. This rally brought to mind the 2008 oil futures 'all-time highs of around $147 a barrel. At that time, tensions between the West, Iran and its nuclear program were driving prices higher, as was a weak U.S. Dollar and inflationary factors. The continued growth of China and other emerging economies would also be expected to offset any drop in consumption in developed nations.
Oil fell to its lowest level since 2004 just months after it reached an all-time high. The 2008 financial crisis, coupled with concerns about an overbought oil market, caused the price of crude to fall below $40 a barrel.
David Hewitt is a senior consultant with Hewitt Energy Perspectives. He said, "Go back 2008." "Oil stocks closely followed crude's rally up to about $100, then became almost completely disconnected when it rose to $147."
He added, "The market was correct then - $147 a barrel quickly became $30." "It is a little bit the same."
Shell shares rose 4.9% Monday compared to their close on February 27, Chevron gained 2,6%, and Exxon gained 0.90%. BP increased by 7.8%.
Simon Lack, Portfolio Manager of the Catalyst Energy Infrastructure Fund, stated that the price of deferred oil contracts is not as high as the spot prices, indicating investors don't expect the disruption in supply to last.
U.S. oil and gas companies may have benefited from a "bigger increase in share price than global oil majors" because U.S. infrastructure and energy supplies are'safe and protected against risk. This has led investors to value these companies higher.
Diamondback, largest independent producer of the Permian Basin, saw its shares gain as much as 7 % on Monday compared to their close on February 27.
Simon Wong, a Portfolio Manager at?Gabelli Funds said that the share prices of Diamondback Corp, APA Corp, and Occidental have risen less than Exxon, and now are beginning to catch up.
He believes that the crude oil prices will also likely decrease when the disruptions end.
(source: Reuters)
