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4 Overvalued Oil Stocks to Avoid as OPEC Agrees to Raise Output

Stock MarketsJul 23, 2021 05:30PM ET
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© Reuters. 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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4 Overvalued Oil Stocks to Avoid as OPEC Agrees to Raise Output
 

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Comments (5)
Bob Raborn
Bob Raborn Jul 25, 2021 6:03PM ET
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Listen to the experts ?  Yeah.....right. Energy will go up unless Covid gets out of control.
Steven king
Steven king Jul 25, 2021 1:34PM ET
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one week you post undervalued stocks to invest. next week you post over valued stock not to buy. Get your stories straight.
Kelly Mayer
Kelly Mayer Jul 24, 2021 8:35PM ET
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Increased 400k production came due to depleting inventories and high demand, pushing oil prices up very fast. The article just mentions half of the facts, which creates a bearish illusion for oil markets. Takes out completely the OPEC 2021-2022 forecasts which ate quite bullish. Also no mention to summer season and current peak oil demand, and oil earnings reports starting nect week, which can be tge star of a long oil rally.
Bob Raborn
Bob Raborn Jul 24, 2021 8:35PM ET
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hoping so
Kelly Mayer
Kelly Mayer Jul 24, 2021 8:20PM ET
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Wow... Completely against the OPEC forecast for 2021-2022... Demand is high enough to justify nice earnings reports and the oil stocks to recover from the 20%-40% dip they just took... If there is a sector that is not in a bubble right now it the oil stocks. Is this article sponsored by hedge funds that want to unhoard their cash and scoop up even further down the bottom?
Jim Morrison
Jim Morrison Jul 23, 2021 9:19PM ET
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I would avoid reading this
 
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