As markets wind down for the week Friday, oil prices are continuing to rise, with WTI crude futures up a full percentage point and Brent crude not far behind -- up 0.9%.
That's good news for shares of ConocoPhillips (NYSE:COP), Phillips 66 (NYSE:PSX), and Occidental Petroleum (NYSE:OXY) -- all of which are enjoying a second straight day of gains, up 7%, 6.8%, and 9.6%, respectively, as of noon EST.
So what's driving oil prices -- and oil stocks -- higher today?
Well, yesterday, Al Jazeera reported that a group including OPEC and allied oil-producing nations such as Russia have agreed to limit their January increase in oil output to just half a million barrels per day (bpd). Granted, on the one hand, any increase in production sounds like it should be bad news for oil prices, as the oil will be flowing into a market that remains saturated due to a lack of demand during the continuing pandemic.
On the other hand though, OPEC+ (as the expanded group is known) previously agreed to ratchet back production by 7.7 million bpd. Thus, even this new "increase" in production still leaves oil producers producing 7.2 million fewer barrels a day than they used to, which helps to keep a noose on supply, and thus support oil prices. And Al Jazeera further reports that the feeling within OPEC+ is that, even if demand begins to come back as the coronavirus pandemic abates, the organization probably shouldn't increase production faster than by an additional 500,000 bpd every month.
At that rate, OPEC should be keeping production below prepandemic levels all throughout 2021, if not longer. And now this news gets even better, because at the same time as OPEC+ is being more or less responsible in its production (i.e., not adding too fast to supply), American oil companies ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX) are taking positive steps of their own to limit supply.
As The Wall Street Journal notes today, Exxon has already promised to cut capital spending (which tends to support production) by anywhere from $5 billion to $10 billion per year through 2025. And now, reports the Journal, Chevron is following suit with a commitment to limit capital spending to no more than $16 billion per year through 2025 -- $6 billion less than previously planned.
Exxon and Chevron stocks, by the way, are joining in the rally that's buoying Conoco, Phillips, and Oxy, too, rising 3.2% and 3.6%, respectively. And the longer oil-producing countries -- and oil-producing companies -- act rationally like this, the better news it will be for all oil stocks.