Issuers heavily levered towards oil and oil prices traded higher this morning, ahead of the OPEC+ meeting this afternoon, according to three buysiders and one sellsider.
The energy alliance, made up of OPEC and non-OPEC partners, noted plans at its last meeting on 1 June to slowly increase production by roughly two million barrels per day between August and December, taking market conditions into consideration to determine the rate. The gradual approach comes after OPEC+ stated in April that it would slowly roll back previous cuts.
The boost in production, however, would amount to less than 500,000 bpd. Meanwhile, vaccination rollouts and a faster-than-expected recovery in the global economy have pushed greater demand, the sources said. As such, the increase is not expected to be enough to offset the higher demand for oil that investors have seen in 1H21, they noted.
What’s more, while OPEC+ could decide to raise production at a higher rate, the group is expected to stick with a slower rollout after suggesting that the demand spike could be temporary and that rich-country demand would be unlikely to ever hit pre-pandemic levels again amid alternative energy and non-fossil fuel initiatives, three of the sources added.
In anticipation of the meeting, WTI Crude rose 2% today and 2.3% this week to USD 75.10 per barrel.
Occidental Petroleum’s USD 1.2bn 4.4% senior unsecured notes due 2046 inched up this week to 97.57 with a 4.564% yield today, compared to 96 to yield 4.674% yesterday (30 June) and 93.75 to yield 4.835% on 28 June, according to MarketAxess. The equity jumped 3.7% to USD 32.42 with a USD 30.588bn market cap today.
Transocean’s USD 610m 6.8% senior unsecured notes due 2038 also grinded higher to 68.25 with a 10.989% yield, versus 65.242 to yield 11.534% yesterday and 61.875 to yield 12.191% last week, according to MarketAxess. Its USD 396m 7.5% senior unsecured notes due 2031 traded today at 77 to yield 11.469%, compared to 73.962 to yield 12.108% yesterday and 69.75 last week, according to MarketAxess. Transocean’s equity spiked 7.4% to USD 4.855 and a USD 2.997bn market cap today.
Elsewhere, Marathon Oil shares climbed 3.5% to USD 14.10 and a market cap of USD 11.109bn, while Devon Energy’s equity popped 2.2% to USD 29.84 per share and a market cap of USD 20.192bn from yesterday’s close. Continental Resources stock also gained, trading at USD 39.89 and a USD 14.628bn market cap, up 4.9% from yesterday’s close. And Laredo Petroleum shares traded 3.4% higher on the day at USD 95.90 and a USD 1.237bn market cap.