Total, Shell, BP… The oil giants on the brink of the stock market precipice?

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– TotalEnergies (formerly Total)

Brent, WTI… Oil prices are struggling. At the start of the week, they fell to their lowest levels in 4 months. OPEC’s decision to extend its production cuts (which were initially scheduled to end this month) until the end of Septemberwent down badly with the market. While these cuts are supposed to support prices, the opposite happened, with market participants fearing that this decision would reflect fears about the economic outlook.», Explains Alexandre Baradez, head of market research at IG France and columnist for Capital. Who underlines in this regard that it is the issue of growth which “has returned to the forefront on global markets in recent days“.

The price of oil started to drop yesterday around 2 p.m. The publication, two hours later, of a manufacturing activity index lower than expected in the United States – and in a contraction zone for the second consecutive month (the manufacturing ISM was reduced from 49.2 to 48 .7, while the consensus of economists was counting on 49.6) – “hit the nail on the head. The price of WTI reference barrel oil fell by 4% over the day», Underlines the expert, who observes, more generally, that the raw materials sector has been falling for around ten days, whether it is energy or industrial metals. The Bloomberg Commodity Index (a gauge of prices in the raw materials sector) fell by 5% in 10 days.

Fears about the American economy weigh down oil

And it is perhaps fears about American growth that are beginning to appear timidly. For almost two months, “the majority of American economic publications come out a little below market expectations, particularly figures on consumption or household income. All against a backdrop of resilient inflation and a Federal Reserve (Fed) which still cannot find the right window to adjust rates downward (which would be likely to support economic growth, Editor’s note)», notes Alexandre Baradez. With the weight of consumption being preponderant in the American economy, the markets are perhaps starting to question the trajectory of economic growth in the coming months. “Some indicators like ISM Services have also contracted recently», adds the analyst in this regard.

On the stock market, shares in the oil sector are falling

On the stock market, this bout of weakness in raw materials is also felt on certain parts of the European stock market. The European Stoxx Europe 600 Oil & Gas equity index, which includes 20 stocks from the energy sector (oil and gas), including TotalEnergies (Total), Shell, BP, Eni, Equinor, Siemens and Repsol, released a just over 7% since its April peak (which was the highest level the index has touched since the summer of 2008). However, there is no incentive to rush to buy European oil stocks at this stage.

Oil stocks still haven’t returned to buying levels

“It does not seem urgent to us to return to purchasing these shares, particularly if these fears about American economic growth were to strengthen a little in the coming days», Judge Alexandre Baradez. From a technical analysis point of view, the Stoxx Europe 600 Oil & Gas equity index is moving in a bullish wedge (a configuration formed by two converging straight lines, one connecting several major peaks and the other several major troughs) multi-year. The risk, at this stage, lies in a return to the bottom of the wedge, or even in a temporary incursion below the wedge to return to test the 23.6% Fibonacci retracement of the imposing bullish rally initiated in the fall of 2020. A return to these levels would then be of interest to cautiously reposition yourself to buy stocks in the oil and gas sector, underlines the expert.

On the stock market, Momentum readers were warned in time of the risk of Total’s plunge

Readers of Momentum, Capital’s daily premium investment letter on the Stock Exchange, were warned in time of the risk of a drop in Total shares (Total Energies). Over the last few years, they have nevertheless been able to make impressive gains on oil stocks (Total, Esso, Maurel & Prom, Vallourec, TechnipEnergies, etc.) and gas stocks (Engie, GTT), bought and sold to timings interesting. Find our scenarios on the CAC 40 and stocks every day in Momentum. To register, simply click on the link above in this article.

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