Story By Avi Salzman |Barron’s| Oil prices notched their sixth straight weekly gain, the longest winning streak in more than a year.
The gains have been aided by Saudi Arabia’s decision to continue curtailing its production into the fall, and by signs that oil demand is finally outpacing supply.
The rise has been aiding oil stocks, which had been trailing the broader market this year after outperforming in 2021 and 2022. The SPDR S&P Oil & Gas Exploration & ProductionXOP +0.75% exchange-traded fund (XOP) is up 13% over the past year. A month ago it was trading flat. Some oil and gas producers are doing even better. Denver-based Ovintiv OVV –0.83% (OVV), for instance, beat earnings and revenue expectations for the second quarter, and its stock is up 29% in the past month. Larger energy companies, which are often more diversified than their smaller peers, tend to get a limited boost from rising prices. Exxon Mobil XOM +0.28% stock (XOM), for instance, is up just 1.9% in the past month.
This week, Saudi Arabia announced that it will continue to hold back an additional one million barrels per day of oil production through September and possibly longer. Russia will reduce its production cut to 300,000 barrels in September from 500,000 barrels in August. Taken together, the announcements were generally positive for crude prices.
“Once again, Saudi Arabia is seeking to put market skeptics on notice,” wrote RBC Capital Markets analyst Helima Croft. Brent crude BRN00 –0.10% , the international benchmark, advanced 1.3% on Friday to $86.24 per barrel, and another weekly gain.
In addition, the U.S. announced that oil storage levels are falling quickly, with inventories dropping by 17 million barrels in the latest week—the largest drop on record. That indicates that demand is quickly outpacing supply. As prices have risen, the Biden administration canceled plans to buy six million barrels of oil for the strategic petroleum reserve.
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