Tuesday's Market Minute: OPEC+ To Consider 1M Barrel Output Cut

OPEC+ is set to meet on Wednesday for the first time in-person since March of 2020 in Vienna, Austria. The organization is considering cutting oil output by more than 1M barrels per day, according to multiple media outlets. This would mark its biggest cut since the start of the pandemic. This sizable reduction could signal the group’s broader concern of a slowing economy amid rising interest rates leading to waning demand. However, a cut of this magnitude also poses risks to the global economy.

The U.S. has been actively seeking greater production, with President Biden searching for new oil sources in Saudi Arabia earlier this year. OPEC+ then accelerated production in July and August, with the group pledging a hike of 100K barrels per day in September. Production rose last month, but concerns linger that output could begin falling this month and continue in a downward spiral into the fourth quarter.

Oil’s price has held well below its March high for the year at $130.50/barrel, falling last month below $80/barrel to levels not seen in nearly nine months. And while average U.S. gas prices have also fallen steadily after hitting a record average of $5/galloon this summer, there has been an uptick in the last two weeks to around $3.80/gallon. 

Monday’s session was no exception, with energy broadly spiking and energy-related equities also getting a lift. Occidental Petroleum OXY gained over 4%, putting its year-to-date gain at over 121%. Other top performers for the year in the S&P 500 include Constellation Energy CEG, Marathon Petroleum MPC, Hess Corporation HES, ConocoPhillips COP, Enphase Energy ENPH, Marathon Oil MRO, and Exxon Mobil XOM – all gaining over 50% YTD.

Within the S&P 500’s sectors, energy is the best performer by a wide margin, up 38% for the year, compared with the next best performer being utilities, which has lost 5.8% since 2022.

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