Investing.com — Stifel analysts on Thursday noted a Reuters report that OPEC+ may be preparing to increase oil production, despite the possibility of lower prices in the near term.
The company noted that the production increase, scheduled for December 1, would mark a change from the group’s recent delays in increasing production for October and November.
Leader Saudi Arabia appears willing to sacrifice prices to regain market share, although it is unlikely to launch an all-out price war, Stifel said.
They pointed out that Saudi production has declined significantly from its peak of 11 million barrels per day (mbpd) in 2022 to around 9.0 mbpd in July 2024, or less than 10% of global supply.
Total OPEC+ production currently stands at 41.7 million barrels per day. The potential increase in production would weigh heavily on oil prices and oilfield service stocks, according to the company.
They note that in the United States, production also increased, by 1.1 mbpd compared to 2023 levels.
In terms of market impact, Stifel suggests that tanker stocks, including International Seaways (NYSE:), Scorpio Tankers (NYSE:), Ardmore Shipping (NYSE:), and DHT Holdings (NYSE:), could benefit of the increase in production.
However, they believe oilfield services stocks could face headwinds. Stifel recommends sticking with high-quality stocks such as Baker Hughes, Liberty Energy, and Cactus (NYSE:) in this environment.
China, the world’s largest importer of , would remain a wild card.
“Although it is difficult to assess, it appears that authorities are working on stimulus measures to achieve the 5% economic growth target in 2025,” Stifel wrote. “Oil demand in China stands at around 16.8 million barrels per day, barely more than in 2023, after growth of 2 million barrels per day in 2023 compared to 2022. Remember that demand in China has been one of the main drivers of growth in global oil demand over the past decade and remains a key variable in global oil consumption.”
Furthermore, the firm believes that midstream companies should fare better if prices fall, with diversified names like Enterprise Products Partners (NYSE:), Energy Transfer (NYSE:), and MPLX (NYSE:) better positioned to withstand volatility.
