4 Overvalued Oil Stocks to Avoid as OPEC Agrees to Raise Output
StockNews
Published Jul 23, 2021 04:16PM ET
Updated Jul 23, 2021 05:30PM ET
4 Overvalued Oil Stocks to Avoid as OPEC Agrees to Raise Output
With the settlement of a disagreement between Saudi Arabia and the UAE, an OPEC+ deal to increase production was sealed earlier this week. Following the agreement, oil prices have declined approximately 8%. Because declining global demand could cause oil prices to fall further, we believe Chevron (CVX), Pioneer Natural Resources (PXD), Phillips 66 (NYSE:PSX), and Valero Energy (VLO), which are trading at expensive valuations, could witness a price retreat soon. Let’s discuss. On July 18, OPEC+ announced plans to increase crude oil production by 400,000 barrels each day beginning in August, following a week of internal conflict. The projected rise in supply, coupled with a decline in market demand amid a deceleration of the economic recovery and rising concerns regarding the rapid spread of the COVID-19 Delta variant, has caused oil prices to slump lately.
West Texas Intermediate crude futures fell below the critical $70 level on July 19. Oil prices in the United States settled at $66.42 per barrel on the same day, hitting a 10-month low. The gradual easing of the supply curbs is expected to continue to put pressure on oil prices.
Oil prices are expected to decline further in the near term owing to decelerating global demand with the resurgence of COVID-19 cases in several countries. Given this backdrop, oil stocks Chevron Corporation (NYSE:CVX), Pioneer Natural Resources Company (NYSE:PXD), Phillips 66 (PSX), and Valero Energy Corporation (NYSE:VLO), which are currently trading at high valuations, might witness a pullback soon. Thus, we think these stocks are best avoided now.
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