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US stock indices completely lost the optimistic mood observed at the start of trading, falling during the day on the back of May data on consumer confidence and inflation expectations that rose to a 35-year high.
Dow Jones Industrial, which rushed up by almost one and a half percent since the opening, eventually “surrendered” the session at minus one and a half, losing about 500 points. The S&P 500 broad market index lost just over two, and the Nasdaq Composite lost almost three.
Chevron is the leader of the Dow Jones
The anticipated rally fails, and the rebound begins to lose momentum. Twenty-seven components of the main stock benchmark closed in negative territory, and only shares of the oil giant Chevron (CVX) +1.6%, Dow Chemicals (DOW) +0.59% and pharmacists from UnitedHealth (UNH) were a bright spot on the DJIA market map on June 28.
And the fall leaders were Nike (NKE) -6.98%, Salesforce (CRM) -5.53% and Home Depot (HD) -4.43%. Despite the sporting goods leader’s strong quarterly results, the outlook for the next fiscal year was too pessimistic.
In contrast to yesterday’s slurred session, the sellers were more confident on Tuesday, easily driving even large-cap stocks into red. Against this background, more than 5% are losing shares of such Big Tech giants as Amazon (AMZN) and Tesla (TSLA). Capitalization of Alphabet (GOOG) and Microsoft (MSFT) decreased by more than 3%. Papers of the most expensive US company Apple (AAPL) became cheaper by 2.98%.
In the light of the above, it seems quite interesting, and most importantly “timely”, the opinion of the ultra bearish Morgan Stanley analytics Mike Wilson, who in an analytical note on Monday “joined” JPMorgan strategists who see a local rebound in the market of the same five to seven percent.
Demand returned to oil stocks
Like yesterday, investors are starting to return to defensive oil stocks. And if Chevron was the leader in the Dow Jones index, then in the S&P 500 the four best papers at once represented the energy sector: Hess Corporation (HES) +5.57%, Occidental Petroleum (OXY) +4.77%, Marathon Oil (MRO ) +4.36% and Diamondback Energy (FANG) +4.35%. Shares of ExxonMobil (XOM), though not in the lead, also gained 2.77%.
Such a development of events was favored by indicators coming from the commodity market. Oil futures continued to rise. The price tag for West Texas benchmark grade WTI reached $112 per barrel, while the cost of North Sea Brent rose already above $118. The new energy vector in the G7 policy is heating up the prices for black gold.
This time the focus is on the Russian oil price limit being discussed in Europe. Reuters, in particular, reported some “positive and productive” discussions on this issue with representatives from China and India, which the agency claims have a clear interest in getting oil from Russia at an even greater discount.
G7 policy fuels oil prices
There are similar conversations about natural gas. It is the desire of the EU, with the friendly suggestion of Emmanuel Macron, to reduce Moscow’s revenues from export deliveries of blue fuel to Europe, which keeps NG quotes on European stock exchanges in suspense for the second week in a row at about $1,500 per thousand cubic meters.
To be honest, I do not fully understand the idea of limiting the price tags for energy carriers from the Russian Federation. Natural gas exactly two years ago was quietly trading at $150, and did not bother anyone. But it was only necessary to launch a political snout into the subtle market pricing mechanism, and the result was not long in coming. Fuel has increased in price by 1000%.
A question for those who understand the subtle policy of our Western partners. What can any news about any restrictions on the oil market lead to? Or are they planning a situation in which oil will be $100 per barrel on the world market, while Russia has the right to sell only $20? Or what would that scheme look like?
Lukoil Vice President Leonid Fedun, who recently retired, voiced the idea a few months ago that it would even be beneficial for us to reduce oil supplies to the world market and stop clinging to volumes. The physical deficit formed by short deliveries from the Russian Federation will immediately restore the price balance between supply and demand. Only with the slightest movements aimed at reducing exports from Russia, oil prices will win back this with prices literally in two or three trading sessions.
Sorry, but I continue not to believe in even the slightest success of Western strategists in any such plan. Of course, it can be assumed that since this happened with gas, it is quite likely that this can happen with oil. But what will they achieve with oil at $200 a barrel? Or do they think they can make the whole world not buy from us at a discount, but already at $150? We live in interesting times.
The Americans have already tripled LNG supplies to Europe over the past three months. And this despite the fact that the total gas imports of LNG to Europe increased by only 75%. And if the United States will squeeze something out of the current situation, it will be an increase in the supply of its democratic oil to Europe at inflated prices, and our volumes will shift to Asia. Russia will not suffer any tangible losses. There is no reason for this at all. But how the Old World will winter with gas at $2000, and with oil at $150 is a big and open question.
Given the new wave of concern in the energy markets of the world, investments in the representatives of the oil and gas industry seem quite promising. Fall will be even more fun…