Over the weekend, OPEC+ held discussions to further cut oil production. This would add to its existing cut of 2 million barrels per day. Plans to cut production again will offset Russia’s increased energy sales to Iran, India, and China.
The OPEC+ supply cut happens at the best time. The summer driving season in the U.S. started on Memorial Day. Vacation-related travel also starts at this time. Demand increases but prices do not rise when supplies are too high.
Energy stocks like Devon Energy (DVN), Occidental Petroleum (OXY), and Chevron (CVX) peaked in April. They had rallied when OPEC+ announced a surprise supply cut. Since then, shares fell in anticipation of a global recession. Markets cannot have it both ways. Nasdaq and S&P 500 are on a 9-month-long rebound. Stock markets are forward-looking. They expect a growth rebound ahead.
Oil and commodity markets are pricing in an economic recession. Lithium and copper prices fell at that time. However, lithium prices rebounded last month while iron ore prices are well above their Nov. 2022 lows.
In addition to oil stocks, investors may look at Freeport-McMoRan (FCX), a copper producer, Cleveland-Cliffs (CLF), an iron ore producer, and Albemarle (ALB), a lithium miner.
