A decision Monday by Saudi Arabia and Russia, the world’s largest oil exporters, to cut production in an effort to push up oil prices is a bullish development for the Club’s struggling energy holdings. Saudi Arabia, the de-facto head of the Organization of the Petroleum Exporting Countries, said it would extend a voluntary oil-output cut of 1 million barrels a day through August. The cartel’s key oil-producing ally, Russia — part of a larger group of producers known as OPEC+ — said it would reduce its oil exports by 500,000 barrels a day next month. Oil prices edged up Monday, with West Texas Intermediate crude — the U.S. oil benchmark — rising by 0.28%, to just under $71 a barrel. WTI has fallen nearly 15% from its 2023 high in April. The Club’s oil-services firm, Haliburton (HAL) — which is down nearly 14% year-to-date — soared 2.7% Monday morning, to nearly $34 a share. Exploration-and-production names Pioneer Natural Resources (PXD) and Coterra Energy (CTRA) edged up slightly. Monday’s decision stands to benefit our three oil stocks mainly because higher energy prices should translate into greater free-cash-flow generation for these companies — a portion of which gets returned to shareholders like us through stock buybacks of dividends. Still, the move by the Saudis and Russians comes amid worries over a slowing global economy and ahead of another potential round of interest-rate hikes from the U.S. Federal Reserve to combat still-persistent inflation. And, at the same time, global oil demand has been held back by China’ slower-than-expected post-Covid economic recovery. In this uncertain economic environment, the U.S. has repeatedly made clear its desire to keep oil prices lower. That could incentivize additional drilling at home, given more domestic production could offset efforts by OPEC+ to push prices up through supply cuts. Nonetheless, while output cuts may be supportive of oil momentarily, we’re skeptical that they alone can do much to…
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