Russian and Saudi Arabian leaders met in St. Petersburg in recent days to discuss the ongoing OPEC production cut as both countries are mulling a shift in policy. “The moment is coming when we should consider assessing ways to exit the deal very serious and gradually ease quotas on output cuts,” Russian Energy Minister Alexander Novak said.
WTI crude oil was down 4.4% in early afternoon trading on May 25. Oil prices tanked after reports indicated that Russia and Saudi Arabia were rethinking output caps in the midst of a prolonged oil rally. Saudi Arabia pledged to fill the gap left by Iran after the Trump administration scuttled the Iranian nuclear deal, and producers are also tackling with declining output from a crisis-ridden Venezuela.
Canadian energy stocks were pummeled on Friday. The S&P/TSX Composite Index was down 30 points in early afternoon trading. Baytex Energy Corp. (TSX:BTE)(NYSE:BTE) was down 6.73% in the same period of trading. Crescent Point Energy Corp. (TSX:CPG) had plunged 4.48% as well. Energy stocks had managed to power an April and May rally in the TSX, but this slump could generate downward pressure before the summer.
The Russian and Saudi Arabian ministers are reportedly considering supply increases of up to 1 million barrels per day. Saudi Arabia is concerned about oil prices reaching above the Brent crude $80 mark and impacting huge consumers like China and India. Canadian oil and gas stocks are likely to retreat further from recent highs.
