The Marathon Oil Corp (NYSE: MRO) stock price rallied 10.2% after OPEC+ announced production cuts of up to 1.16 million barrels of oil daily. The group led by Saudi Arabia announced the output cuts to boost oil prices, trading at levels last seen before Russia invaded Ukraine.
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The cuts come when most governments have almost won the battle against inflation, aided significantly by the decline in oil prices since June 2022. Oil prices fell from $122 to $64 in late March 2023 before rising slightly.
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However, crude oil prices, as tracked by the West Texas Intermediate (WTI), surged to trade at $81.60 from Friday’s closing price of $75.72. The output cuts have led some analysts to predict that crude oil prices could reach $100 in future, putting the global economy in grave danger of tipping over into a recession.
The high oil prices could also lead to higher inflation in most countries, but oil companies such as Marathon Oil will benefit immensely from the higher oil prices, boosting their revenues. Oil companies were the biggest beneficiaries of the oil price rally from December 2021 to March 2022.
Marathon Oil’s share price will continue rising if the crude oil prices remain high since its revenues will likely rise if it continues producing and selling the same amount of oil it is selling today.
Therefore, today’s rally could lead to a more significant rally in the company’s share price over time. It is unclear how the production cuts will impact crude oil prices over the coming weeks and months. If the high prices continue, MRO stock will keep rising along with the oil prices.
The OPEC cuts were complemented by Russia’s extension of its 500,000 barrels daily production cut for another year. The move will likely underpin higher oil prices for a while. Hence, the stocks of most oil companies will continue rising, buoyed by the higher oil prices.
*This is not investment advice.
The Marathon Oil (MRO) stock price.
The Marathon Oil (MRO) stock price rallied 10.22% to trade at $26.41, rising from Friday’s closing price of $23.96.
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