After last week's cuts from Nigeria and Venezuela, I stated my view that the only way any cuts would be able to have a substantial effect on the price of the precious crude would be if we started to see pullbacks from some of the larger OPEC nations. Well, today we have the first sign of such production cuts as OPEC now plans to cut back 1 million barrels a day. Of this, 300,000 barrels are being reduced from Saudi Arabia. An OPEC governor stated that these cuts would be made effective as soon as possible.
So far OPEC has not made any concrete plans to meet to discuss any further cuts. But should today's actions not have the desired result of stabilizing prices, don't be surprised if the group doesn't move quickly in the weeks ahead. It is apparent that OPEC has said enough is enough and will now start to do whatever they have to in order to protect oil's price.
The chart below gives you an indication of just how steep oil's sell off has been over recent months:
Today the market has rallied on the news and oil has traded up $1.34 to $60.75 after hitting a high on the day of $60.97.
Let's check out how oil stocks are doing on Wall Street:
- Sunoco Inc. (NYSE: SUN): +0.9% to $61.06 up $0.58
- Valero Energy (NYSE: VLO): +1.0% to $50.60 up $0.50
- ExxonMobil (NYSE: XOM): +1.0% to $67.30 up $0.69
- Chevron Corp (NYSE: CVX): +0.5% to $64.02 up $0.32
- BP p.l.s. ADR (NYSE: BP): -0.6% to $64.66 down $0.39
- Oil Service Holders Trust (AMEX: OIH): +1.9% to $124.95 up $2.35
Michael Fowlkes has worked as a stock trader for 7 years and spent the last 2 years working as an analyst and portfolio manager for an online investment advisory service.