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Should You Buy Falling Oil Prices?

Oil prices nosedived alongside the broader market on Tuesday, with US crude falling to the psychologically important $100/bbl level as growing recession worries and weakening demand outweighed a fundamentally tight supply market. WTI crude fell 8.2% to $99.50/bbl, its lowest since April 25 and below the $100/bbl level in more than a month. At one point, WTI fell more than 10% to trade as low as $97.43. Meanwhile, front-month Brent crude fell even more, losing 9.4% to $102.77/bbl, its lowest settlement since May 10.

“A growing number of analysts are expecting many of the world’s major economies to experience negative growth over the next few months, and this Drag the US into recession,” in Fawad Razakzada, Market Analyst City indextold Bloomberg.

“In the near term, Dow and S&P will have a major factor on crude direction Fears of recession remainBOK FinanceDennis Kistler told Bloomberg. “They demand fuel.”With the 4th of July holiday behind us, it has slowed down considerably.

The brownie dollar is not helping oil and commodity prices as the major currency continues to be the world’s preferred safe haven during these turbulent times.

Capital flows into the US dollarIt sent [the dollar] Soaring… Commodity prices seem to be heading headlong,” Colin Czynski, chief market strategist at SIA Wealth Management, told MarketWatch.

Not surprisingly, energy stocks have been taking a hit in the recent selloff Halliburton Companyy (NYSE: HAL ) -8.1%, APA Corporation (NASDAQ: APA ) -7.4%, ConocoPhillips (NYSE: COP ) -6.9%, and Hess Corporation (NYSE: HES ) -6.8% was the biggest decliner.

City Analysts warn Crude prices could fall to $65/bbl this year In case of recession. Oil prices could fall to $45 in another year as supplies hold, experts say, but the global economic slowdown will cause demand to fall.

Fortunately for the bulls, the bank placed only a 10% probability on this outcome.

Still, Citi is clearly in the bearish camp and pegged a 50% chance of Brent crude falling to $85/bbl by the end of 2022.

Limited difficulty

Indeed, despite the recent correction, bullish sentiment remains strong in oil markets, with many analysts saying crude oil’s downside is masked by tight supplies.

Despite demand concerns given the gloomy macro outlook, the market is expected to remain tight for the remainder of the year. OPEC+ producers have limited room to significantly increase production and therefore will not be able to offer much relief to the market,” says Warren Patterson, ING’s head of commodity strategy.

Related: China continues to buy Russian crude at record levels

While the oil price rally appears to have stalled over the past month, giving further gains to the energy sector, a cross-section of Wall Street believes oil prices still have plenty of room for upside. Such a bull JPMorgan Chase, Last week warned global oil prices Rise to “atmospheric” $380/bbl If the G7 nations succeed in imposing limits on the price of Russian oil, it will prompt Vladimir Putin to impose retaliatory production cuts.

According to JPM, Russia’s strong fiscal position means the country can afford to cut crude production by 5M bbl per day without further damaging its economy. However, such a sharp cut would be bad news for oil consumers as it would push Brent crude prices to $380/bl.

“The most obvious and likely risk with a price cap is that Russia may choose not to participate and instead retaliate by reducing exports,” “The government may retaliate by cutting production as a way to hurt the West. Global oil market tightness is on Russia’s side,” JPM analysts wrote.

Smart investors agree: Three energy gurus led by Warren Buffett have chosen to follow Oracle’s time-tested market wisdom. scared when others There are greedyAnd greedy when others There are scared In the past few weeks, Buffett, Jerry Jones and Harold Hamm–three of the richest and most successful businessmen in the US–have doubled down on their oil and gas bets, using the selloff as a buying opportunity.

Between June 17 and June 22, Buffett bought 9 million shares of Occidental Petroleum (NYSE:OXY) at about $56 per share, which compares favorably with his previous OXY purchases in the $50-58 range. As a result, Buffett now owns 25% of OXY, counting his warrants and total shares purchased. Oracle of Omaha also has a $20 billion stake Chevron Corporation (NYSE:CVX). Warren Buffett is ranked 7th richest person in the world With a net worth of $96.9B. Unfortunately, Buffett has seen his net worth shrink by $13.4B year-to-date, mainly due to the poor performance of his other US stock investments due to a widespread market selloff.

Several weeks ago, The Wall Street Journal featured Dallas Cowboys owner Jerry Jones In a story detailing how a billionaire raised his $1.1B investment in a natural gas producer Comstock Resources Inc. (NYSE:CRK) to $2.7B. Interestingly, Jones bought control of Comstock Resources in the depths of the gas bust before natural gas prices made a dramatic U-turn. Jerry Jones is #182 on the Bloomberg Billionaires Index with a net worth of $10.7B, an increase of nearly 15%.

Meanwhile, Harold Hamm is the majority owner of the shale exploration giant Continental resources (NYSE:CLR), has waged an all-out battle to regain a minority stake in the company. Earlier this month, Hamm offered to buy the rest of the shale driller he and his family don’t already own for $4.3 billion. or $70/share, claiming that his company is grossly undervalued. The Hamm family collectively owns 83% of the total outstanding shares of common stock.

by Alex Kimani for Oilprice.com

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