Investors seemed to have chosen Friday to book in a devastating recession

Almost all oil and gas equities plummeted in value today, even those regarded as among the "safest" oil and gas stocks.
 
HUNG HOM, Hong Kong - Oct. 26, 2022 - PRLog -- All of these oil and gas-related equities appear to be reacting to the drop in oil prices, in November oil futures fell 5.5% at the time to $78.90 as of this writing, mirroring the first two stocks. Natural gas prices, which had been more durable due to Russia's disruption of gas supplies to Europe, were also sliding today, down 3.7% as of this writing and down more than 30% from yearly highs just a month ago.

The reasons for the drop in oil and gas prices are quite simple. Since the Federal Reserve issued a more aggressive view for interest rate rises on Wednesday, investors tend to believe that a recession is now unavoidable. In theory, a worldwide recession would reduce demand for oil and gas. Wednesday's meeting and Fed Chair Jerome Powell's statements appeared to corroborate this in the eyes of many investors, who are dumping cyclical assets, notably commodities companies, in large numbers as the weekend approaches.

Oil and gas equities have been among the best performers this year, as a lack of supply owing to pandemic-related shutdowns and underinvestment has resulted in a surge in demand. Furthermore, Russia's invasion of Ukraine led oil prices to skyrocket. As a result, the Biden administration is releasing around 1 million barrels per day from the Strategic Petroleum Reserve, which has helped to slow the rise. Consumers have reduced needless driving and road excursions due to high pricing and inflation in other products and services. As a result, prices have dropped significantly since early summer.

With inflation persisting in sectors such as housing expenses, medical care and others, the Federal Reserve and other central banks across the world are tightening financial conditions more aggressively than originally anticipated, perhaps leading to a larger global downturn.

While another drop in oil and gas prices is possible, prices might potentially rise by the end of the year. At the end of October, the Biden administration is intended to stop releasing barrels from the SPR. While this is expected to coincide with increased output from U.S. producers, it remains to be seen how much private businesses would pump. Additional releases beyond October are being discussed, but nothing has been finalized as of yet.

Furthermore, OPEC+ has already decided to cut some output next month because it feels oil and gas prices have fallen too low. This might also provide some pricing stability.

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