The relentless decline in oil prices continued after this past weekend. OPEC+ agreed to increase oil supply by adding 411,000 barrels daily in June.
WTI crude prices fell by 2.2% to close at around $57. This has repercussions for inflation, the war in Russia/Ukraine, oil and gas stocks, and the global economy.
Next week, the U.S. inflation released for May 13 will benefit from the ongoing drop in energy prices. This will offset higher prices caused by consumers buying expensive items. People avoided the impact of tariffs starting at 10% by purchasing appliances and automobiles in April. This helped General Motors (GM) and Ford Motor (F) shares rebound in the last month.
Russia will lose out on OPEC+ increasing supply. Lower oil prices will cut Russia’s revenue, which it needs to fund its war. Conversely, NATO allies will increase their sales of military equipment to Ukraine. RTX (RTX), for example, will sell more Global Patriot missile defense systems. Howmet (HWM) and Lockheed Martin (LMT) are also attractive holdings.
Exxon Mobil (XOM), Occidental Petroleum (OXY), and Chevron (CVX) are among the integrated energy firms that will slump. Income investors may start a small position in those firms to collect the dividend income.
Due to tariffs slowing trade, the global economy risks slowing down. This will hurt oil and gas stocks, while airlines benefit. American Airlines (AAL), is trending higher as oil prices lower its operating costs.
