Oil prices hit a record low on Tuesday, declining for the third successive day following a crucial decision by the Organization of the Petroleum Exporting Countries (OPEC) on Friday. The oil cartel’s decision to maintain its production ceiling led to a drop in prices on Tuesday as well. As a result, oil prices have suffered heavy losses and investors and key investors are hurrying to exit the sector.
Some market watchers believe that you should exit the oil and gas space entirely. Others believe that the slide in prices may have led to good value picks becoming available at attractive prices. This is particularly true for refining and some pipeline companies. It would be a good idea to select some of these at a time when stock prices have plunged.
OPEC Retains Production Ceiling
Last Friday, OPEC decided to maintain a production ceiling, which reflects the “current actual” output. In fact, the international cartel of oil producers decided to raise the ceiling of daily production from the prior level of 30 million barrels to 31.5 million barrels. The cartel was considering an output cut during the 7-hour meeting last Friday, but found that lowering of output only by the OPEC members will not be enough to lift oil prices.
As a result, prices of West Texas Intermediate (WTI) crude oil and Brent crude oil dropped 2.8% and 1.9% to $39.97 a barrel and $43 per barrel, respectively. Consequently, key stocks from the energy sector such as Occidental Petroleum Corporation (OXY – Analyst Report) and Kinder Morgan, Inc. (KMI – Analyst Report) decreased 0.9% and 12.7%, respectively on Friday.
Decision Leads to Record Low
Losses for the sector flowed over into Monday, hurting the broader markets. Exxon Mobil Corp. (XOM – Analyst Report) and Chevron Corp. (CVX – Analyst Report) dropped 2.6% and 2.7%, respectively.
In a volatile trading session on Tuesday, both the WTI and Brent crude oil closed at their lowest settlement prices since Feb 2009. Price of WTI crude oil dropped 0.4% to $37.51 a barrel, while Brent crude oil declined 1.2% to $40.26 a barrel. Price of WTI crude oil dropped 0.4% to $37.51 a barrel, while the Brent crude oil declined 1.2% to $40.26 a barrel. Exxon Mobil and Chevron dropped 2.8% and 0.9%, respectively.
