Wall Street Slides as High Oil Prices Fuel Further Uncertainty

March 07, 2022 23:52

In Monday’s trading session, uncertainty made its presence felt once again in the financial markets, and there were no shortage of talking points.

We start with the Russian rouble, which began this week in a similar vein to the previous one. Over the course of last week, the rouble fell more than 23% against the US dollar and, yesterday, the Russian currency closed the session with a single day loss of 26.82% against the greenback, in an increasingly illiquid market.

Amid the ongoing uncertainty, safe haven favourite gold has been rising steadily, climbing more than 10% since the beginning of February and causing many to question when, rather than if, the shiny precious metal would once again break above $2,000 an ounce. It happened yesterday, with spot gold briefly touching $2,002.40, before retreating back below the important level of $2,000.

However, it is another commodity which continues to steal most of the headlines, and it is to this commodity which we now turn our attention. Oil.

Crude oil continues its relentless rise, with Brent crude briefly trading above $140 a barrel intraday on Sunday for the first time since 2008. It settled back below this level as the session wore on, but remains up almost 40% since the beginning of February. WTI crude, another global benchmark for crude oil, has gained more than 35% over the same period.

This surge in oil prices is fuelling uncertainty in the stock markets, as investors become increasingly concerned about the prospect of already high inflation becoming even higher. As oil becomes more expensive, input costs rise for businesses, who pass on the increased costs to consumers, putting upward pressure on prices.

This uneasiness was evident on Wall Street yesterday, as the Dow Jones, S&P 500 and Nasdaq Composite all fell by 2.37%, 2.95% and 3.62% respectively, taking year to date losses to 9.7%, 11.9% and 18%.

Whilst high oil prices may be adding to investors’ current concerns, many oil and gas stocks are likely to benefit from the recent rise in prices. One such company, Occidental Petroleum, found itself in the headlines yesterday thanks to a high-profile new investor.

Between Wednesday and Friday last week, the legendary Warren Buffett’s Berkshire Hathaway purchased 61.4 million shares in the company, for a total of around $5.1 billion. Berkshire already owned $10 billion worth of preferred stock in the company before its latest investment.

The large purchase suggests that Berkshire Hathaway, who also hold a stake currently worth more than $6 billion in oil giant Chevron, are preparing for oil prices to remain high and possibly rise even further in the future.

Occidental Petroleum shares, which gained almost 45% last week, fell 1.37% during yesterday’s session.

Depicted: Admirals MetaTrader 5 – Occidental Petroleum Daily Chart. Date Range: 2 July 2021 – 7 March 2022. Date Captured: 7 March 2022. Past performance is not a reliable indicator of future results.

Depicted: Admirals MetaTrader 5 – Occidental Petroleum Weekly Chart. Date Range: 23 August 2015 – 7 March 2022. Date Captured: 7 March 2022. Past performance is not a reliable indicator of future results.


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Roberto Rivero
Roberto Rivero Financial Writer, Admirals, London

Roberto spent 11 years designing trading and decision-making systems for traders and fund managers and a further 13 years at S&P, working with professional investors. He has a BSc in Economics and an MBA and has been an active investor since the mid-1990s