Oil stocks rally on higher prices

Energy, one of only four sectors in the green today, was the standout performer at noon, up 2.33% on the back of the decision by OPEC+ oil-producing nations to implement the biggest cut in production since the start of the pandemic.

In response to the news Global benchmark Brent crude climbed 1.7% to US$93.37 per barrel and the US WTI gained 1.4% to US$87.76 per barrel.

Slap in the face

Today’s shock decision by Saudi-led OPEC+ was seen as a politically motivated, short-sighted, yet well-orchestrated slap in the face for the Biden administration, desperate for fuel prices to be contained in the lead-up to mid-term elections in the US.

Caught between the devil and the deep blue sea, US President, Joe Biden has on the one hand tried to lower fuel costs for Americans, while at the same time severing major energy exporter Russia from revenues needed to fund an unwinnable war in Ukraine.

US taps historically low reserves

In an effort to staunch price rises, the White House is again tapping the country’s Strategic Petroleum Reserve - now at their lowest level since July 1984 - with 10m barrels set to be put on the market next month.

In addition to exploring any additional responsible actions to continue increasing domestic production in the immediate term, the Biden administration also plans to consult with Congress on how it might be able to curb OPEC’s control over energy prices going forward.

Having read the tea leaves within recent developments, Andy Lipow, from Lipow Oil Associates believes OPEC’s decision to cut production recognises “the waning influence of the US on OPEC to maintain an adequate supply of oil.”

“The US can’t release strategic petroleum reserves forever, and eventually it will run out and OPEC knows it,” he said.

Lipow also reminded investors that any attempt by the Biden administration to foster the heightened oil production flies in the face of the country’s planned pivot away from oil and gas.

Aussie majors up

Buoyed by a strong investor update today, along with higher oil prices, Carnarvon Energy (ASX: CVN) was up around 4.69% $0.168.

A partner on the Santos-operated Bedout subbasin joint venture contemplating development of Dorado oil field offshore WA, Carnarvon recently advised the market that over 100 prospects have been identified across the JV’s four permits.

While Santos, operator of all four permits, has interests ranging from 70-80%, Carnarvon holds the remaining interests in each.

Other noteworthy S&P/ASX 200 Energy stocks higher today include:

• Woodside (ASX: WDS) up 2.2% to $34.63.

• Santos (ASX: AST) up 1.31% to $7.71.

• Karoon Energy (ASX: KAR) up 1% to $2.10

• Strike Energy (ASX: STX) up 4.08% to $0.255

Carnarvon Energy share price over 12 months.