What happened

It's Wednesday morning, and oil stocks are tanking. As of 10:10 a.m. ET, shares of industry bellwether ExxonMobil (XOM 0.57%) have recovered off their lows but are still down about 1.7%. Smaller oil stocks Occidental Petroleum (OXY 0.56%) and Devon Energy (DVN 0.58%) are down 2.7% and 2.9%, respectively.

And the price of oil is to blame for it all.

So what

As OilPrice.com reports this morning, the price per barrel of both West Texas Intermediate (WTI) crude oil and Brent are heading lower Wednesday, down 3.9% and 3.6%, respectively, with WTI selling for $83 and change and Brent just under $90 a barrel.  

OilPrice is blaming continued COVID-19 lockdowns in China, designed to halt the spread of the virus but having the result of curtailing economic activity (and demand for oil) for "demand destruction" globally. And the natural result of falling demand given steady supply is lower prices.

Granted, OPEC+ has taken steps to counteract this trend, announcing cuts to its targeted quota on Monday. However, the size of the cut (just 100,000 barrels per day) and the timing (it doesn't kick in until next month) are muting investors' reaction to the move. The more so because OPEC+ apparently hasn't actually been willing or able to max out its quota lately in any case -- so the "cut" to production is less an action and more an acknowledgement of how much oil is actually being produced.  

Now what

That, in a nutshell, is why oil stocks are down today -- because OPEC didn't succeed Monday in halting the slide in the price of oil. But there's still hope for a turnaround in oil prices, and oil stock prices as well.

Consider: As Saudi Arabian Prince Abdulaziz bin Salman said in a statement, OPEC "will be attentive, pre-emptive and pro-active in terms of supporting the stability and the efficient functioning of the market to the benefit of market participants and the industry" going forward. That appears to imply that more production cuts are on the table -- that the 100,000-barrel cut was just a warning shot, an announcement by Saudi Arabia that it thinks prices have fallen far enough, and will step in if needed to keep them from falling farther.

Granted, that may not be up to Saudi Arabia. As OilPrice observes, the difference between OPEC's current quota, and the amount OPEC+ countries are actually producing, is not 100,000 barrels per day, but 2.9 million barrels per day. So it's an open question how much more quotas will have to be cut to actually affect production, oil prices, and oil stock prices.  

Seems to me, while oil stock prices might react to press releases from OPEC in the short term, what really matters here are actual production levels. Unless you see those ratchet down, oil prices are likely to continue falling, and to take the stock prices of Exxon, Oxy, and Devon along with them.