Oil's slippery ride

Looks like world peace and oil markets just don’t mix.

Just yesterday, crude slid to its lowest price since 2021 as Russia and Ukraine continued hashing out a ceasefire that could lift sanctions on Russian oil. Then today, more drama in another corner of the world—President Donald Trump’s “total and complete blockade” of sanctioned oil tankers in and out of Venezuela—caused oil to jump out of its slump.

Brent crude futures, the international benchmark, surged 2.51% today to over $60.40 per barrel. Shares of Exxon Mobil, Shell, and Chevron climbed 2.35%, 1.55%, and 1.89%, respectively.

Still, this rally may be short-lived, since the world is drowning in an oil supply glut. OPEC nations have ramped up production, and so has the US. Within our own borders, crude oil output hit a record-high of 5.9 million barrels per day in November, according to the US Energy Information Agency (EIA).

The good news is that high supply = lower gas prices, which should come as a relief to Americans as they fill their tanks on their merry way to grandma’s house this holiday season. AAA found that the average price of gas in the US this week dipped below the $3 threshold to $2.906 per gallon, down from $3.023 a year ago.

What this means for investors: Although lower gas prices make drivers happy, investors have reason to worry, with Brent crude futures down over 18% year to date. Nonetheless, those big oil companies we mentioned earlier (Shell, Exxon, and Chevron) are all up this year.

How can oil futures be down when stocks are up? For one, these companies don’t live or die on oil alone. They also harvest natural gas, and exports of liquified natural gas (LNG) surged this year, with the US on track to surpass Russia as the world’s top exporter, according to the EIA.

Even so, natural gas prices have been on their own rollercoaster lately for similar reasons: oversupply. But unlike crude, high supply doesn’t equate to lower prices: With an unusually cold winter ahead, Americans who heat their homes with natural gas are expected to face an 8.4% hike in prices.

Bottom line: Oil and natural gas aren’t discretionary purchases like the latest Labubu, so no matter what happens day to day, these companies aren’t likely to leave you completely out in the cold anytime soon.—JD