JBLU - Wall Street Breakfast Podcast: Oil Heading For A Supply Crunch?

2024-01-17 07:30:00 ET

Summary

• Occidental Petroleum CEO warns of a potential supply crunch in the global oil market due to a shift away from exploration activities.
• Google is set to lay off several hundred workers from its advertising sales division as part of a strategy to change how the sales team operates.
• Boeing shares fall after a collision between two planes at Chicago's O'Hare International Airport.

Listen below or on the go on Apple Podcasts and Spotify

Is the oil market heading for a supply crunch? (0:30) Search giant Google to lay off more workers (1:30) and Boeing shares fall after collision at O’Hare (2:10).

This is an abridged transcript of the podcast:

The global oil market could be heading for a supply crunch starting in 2025 if exploration activities continue to fail to keep up with demand, Occidental Petroleum (NYSE: OXY ) CEO Vicki Hollub said Tuesday at the World Economic Forum in Davos, Switzerland.

According to Hollub, U.S. oil companies in particular have shifted away from exploration since 2012 and focused on tapping shale oil reserves, which have a much shorter lifespan than conventionally produced oil.

The market will move from near-term oversupply to a long period when the world will need more oil, Hollub warned.

ING analysts said that increased Middle East tensions pose supply risks for crude oil and liquefied natural gas, but "we are not seeing any fundamental impact on supply yet," analysts Ewa Manthey and Warren Patterson wrote . "In order to see oil prices breaking significantly higher, we will need to see even further escalation and/or a meaningful loss in oil supply."

Search giant Google (NASDAQ: GOOG ) (NASDAQ: GOOGL ) will fire several hundred workers from its advertising sales division, according to a memo sent by chief business officer Philipp Schindler to staff on Tuesday, which was viewed by Business Insider.

The layoffs are part of the company's strategy to change how the sales team operates. Google has been moving more employees to its customer solutions team, which serves medium-level clients, from the team that handles larger clients who didn't require as many resources from Google. The latest job cuts come nearly a week after Google ( GOOG ) ( GOOGL ) said it would lay off hundreds of staff in its voice assistant, hardware, and engineering teams.

Yesterday in our Wall Street Lunch episode , we mentioned that Boenig shares were downgraded by Wells Fargo. Boeing (NYSE: BA ) shares fell further later on Tuesday after a collision at Chicago's O'Hare International Airport.

The Federal Aviation Administration is investigating the accident between two Boeing planes that were taxiing at O’Hare after a collision took place between the wingtips of a Delta Airlines ( DAL ) plane and an All Nippon Airways ( OTCPK:ALNPY ) plane. It was reported that no individuals were injured and all customers deplaned normally.

Other articles to look out for on Seeking Alpha:

BP confirms new CEO

Exxon inks another LNG sales agreement with Mexico Pacific

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In the U.S. on Tuesday, all three major indexes ended lower impacted by increasing yields and comments from Federal Reserve Governor Waller, suggesting the Fed may not cut interest rates as aggressively as initially expected, mirroring earlier statements from European Central Bank officials which triggered a recalibration of rate cut expectations.

U.S. stock futures pulled back after the major averages kicked off the holiday-shortened week on a negative note: Dow -0.3%; S&P 500 -0.4%; Nasdaq -0.7%.

U.S. crude oil futures closed lower Tuesday as traders appeared more worried about demand shortfalls than potential supply shortages from escalating tensions in the Middle East.

Weighing on prices, the U.S. dollar jumped to a one-month high as investors curbed expectations of an interest rate cut by the Federal Reserve in March.

ECB officials said it was too soon to discuss cutting interest rates because inflation remains high.

Asia-Pacific stocks slid on weak China data. China's economy saw less-than-anticipated growth in Q4 due to ongoing challenges such as sluggish consumer spending and a decline in the real estate sector.

Investors now await US retail sales data on Wednesday and fresh remarks from Fed officials this week to better gauge the monetary policy outlook.

Now let’s take a look at the markets as of 6 am. Ahead of the opening bell today, stock index futures were lower with plenty more from the Fed on the way.

S&P futures ( SPX ) -0.4%, Dow futures ( INDU ) -0.4% and Nasdaq 100 futures ( NDX:IND ) fell -0.6%. The 10-year Treasury yield ( US10Y ) fell 1 basis point to 4.06%.

The biggest movers for the day premarket: Shares of Rumble (NASDAQ: RUM ) surged over 7%. The notable boost in Rumble's stock was attributed to former President Donald Trump's significant victory in the Iowa caucuses as Rumble is often seen as a conservative alternative to YouTube.

Spirit Airlines' (NYSE: SAVE ) shares took a further hit on Wednesday, dropping by 5%, following a significant 47% loss in Tuesday's closing. The downturn came after a federal judge blocked the planned $3.8B sale to JetBlue Airways (NASDAQ: JBLU ) on antitrust grounds. According to a TD Cowen analyst , Spirit Airlines ( SAVE ) may look for another buyer after a federal judge's decision, though it's more likely to seek a Chapter 11 filing.

Chinese electric vehicle ( EV ) stocks continued their decline on Wednesday as investors maintained caution amid near-term challenges. Pricing competition remains intense while forecasts for sales in 2024 have been revised downward , with geopolitical backdrops potentially affecting sentiment. XPeng experienced a 9% decline, NIO saw a 6% drop, and Li Auto shed 4.4%. NIO reached a new 52-week low of $6.45 in the last session.

On today’s economic calendar:

8:30 a.m Retail Sales. Economists expect a 0.4% rise in the headline number, with core retail sales up 0.2% on the month.

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