Crude oil prices plunge nearly 5% Monday following a Wall Street Journal report that Saudi Arabia and other oil producers are discussing a production increase of as much as 500K bbl/day for next week's OPEC+ meeting.
The move would come a day before the European Union has said it would impose an embargo on Russian oil and the G-7's plan to launch a price cap on Russian crude sales, potentially taking petroleum supplies off the market.
Crude futures already were trading around their lowest levels since late September, with rising COVID-19 cases in China causing further worries about global demand.
Energy stocks dominate Monday's biggest S&P 500 losers: Halliburton (HAL) -7.1%, Diamondback Energy (FANG) -6.7%, Marathon Oil (MRO) -5.6%, APA Corp. (APA) -5.5%, Schlumberger (SLB) -5.5%, Devon Energy (DVN) -5.3%, Hess (HES) -5%, Pioneer Natural Resources (PXD) -4.5%, EOG Resources (EOG) -4.5%, Occidental Petroleum (OXY) -4.4%, Baker Hughes (BKR) -4.2%, Targa Resources (TRGP) -4.1%, ConocoPhillips (COP) -4.1%.
Any production increase would mark a partial reversal of last month's OPEC+ decision to cut output by 2M bbl/day that angered the U.S.
But talk of a production hike began to emerge last week after the Biden administration told a federal court judge that Saudi Crown Prince Mohammed bin Salman should have sovereign immunity from a U.S. federal lawsuit related to the killing of Saudi journalist Jamal Khashoggi.
This would be an unusual time for OPEC+ to consider a production increase, with global oil prices falling 10% last week.