Despite the dampening effects of inflation threats and conflicts across several global hotspots, the global economy remains generally robust, with strong demand for fossil fuels keeping the energy sector active overall.
However, Wednesday painted a different picture, as energy stock sentiment was heavily influenced by a noticeable decline in oil prices. Consequently, investors reduced their holdings in oil giants such as ConocoPhillips (COP) and ExxonMobil (XOM), both of which saw their stock prices drop by about 3% at close. Their peer, Equinor ASA (EQNR), faced an even sharper decline of nearly 6%.
Brent crude oil futures, widely regarded as the benchmark by many “black gold” investors and analysts, fell by more than 2% on Wednesday. The value of oil stocks is often swayed by movements in oil prices.
One major factor behind the drop was the apparent progress in peace talks between Russia and Ukraine. U.S. President Trump reportedly made separate calls regarding this matter to the Russian and Ukrainian leaders. Following these calls, Trump posted on his Truth Social platform, stating that he and Putin had “agreed to have our teams start negotiations immediately.”
While this is just the early stages of dialogue aimed at ending the war, it does signal a possible peaceful resolution. This could undoubtedly make the world safer but, on a more localized level, it would alleviate security concerns over oil transportation through the Black Sea. Any improvement in the situation could put downward pressure on prices.
Macroeconomic news also played a role in investors selling off oil stocks. The Consumer Price Index (CPI) rose 3% year-over-year, higher than the 2.9% increase in December and significantly above the recent low of 2.4% in September.
Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) stated in its monthly report on Wednesday that global oil demand is expected to maintain relatively strong growth in 2025. The recovery in air travel and road transportation will continue to drive oil consumption, and potential trade tariffs are not expected to significantly impact economic growth.
