Oil And Gas Stocks Provide A Glimmer Of Light In A Dark Market | OilPrice.com

The S&P 500 has just had its worse first half since 1970.While the S&P 500 has dropped by 20% since the beginning of the year, the S&P 500 energy sub-index has risen by 29%.

Oil and gas companies have emerged as the only bright spot in a deeply bearish U.S. stock market, thanks to soaring commodity prices fuelled by the war in Ukraine. TheA combination of factors caused the slump, including surging COVID-19 cases driven by the Omicron variant at the beginning of the year, followed by Russia's invasion of Ukraine in February, decades-high inflation, and aggressive interest rate hikes from the Federal Reserve., comprising 21 big oil and gas groups, jumped 29.

Although the oil price rally appears to have stalled over the past month, thus capping further gains for the energy sector, a cross-section of Wall Street believes that oil prices still have plenty of upside. One such bull isif G7 nations succeed in imposing caps on the price of Russian oil and prompt Vladimir Putin to inflict retaliatory production cuts.

According to JPM, Russia's robust fiscal position means that the country can afford to slash crude output by as much as 5M bbl/day without excessively damaging its economy. However, such a drastic reduction would be bad news for oil consumers as it would push Brent crude prices to $380/bbl. "The most obvious and likely risk with a price cap is that Russia might choose not to participate and instead retaliate by reducing exports. It is likely that the government could retaliate by cutting output as a way to inflict pain on the West. The tightness of the global oil market is on Russia's side,With Brent currently trading at $112/bbl, such a massive rise in oil prices would definitely re-ignite the oil price rally.

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