Oil price set to trade sideways, symbolic Dow Jones exit for Exxon

Oil prices were trading at around $61 a barrel at the start of the year, only for them to crash in March as lockdowns eroded energy demand and markets panicked to make sense of the coronavirus pandemic, with futures contracts closing at -$37 a barrel in April amid the turmoil.

According to the US Energy Information Administration (EIA), global oil prices are expected to average at $43 a barrel throughout the second half of this year, with that figure expected to rise to $50 in 2021.

Brent crude once again broke above the $45 a barrel this week, where it will likely hover around at for the remainder of the year, while the US West Texas Intermediate (WTI) rallied through $43 on Wednesday.

However, it remains unclear if oil price forecasts will be realised or if they will fall short of expectations considering the myriad of headwinds battering financial markets face over the next 14 months?

Oil market turmoil leads to symbolic Dow Jones exit for Exxon

A shake-up in the Dow Jones Industrial Average index offered insight into how the negative price outlook for crude is impacting companies operating in the oil and gas industry.

Exxon Mobil was once the world’s most valuable stocks and has been a member of the Dow Jones since 1928. But next Monday, the oil and gas major will no longer feature on the index due to its share price falling more than 40% this year amid low crude prices.

However, the oil and gas major could return to the index if demand recovers, but that outcome relies on a stabilising of the coronavirus crisis which continues to hinder global economic activity.

Rivals like BP and Royal Dutch Shell have suffered similar slumps in their respective share prices due to the challenging market conditions. But both have opted to write-off billions in oil and gas assets in order to focus their attention on transitioning to renewables due to the dim price outlook for crude.

‘Energy markets are fundamentally changing, shifting towards low carbon, driven by societal expectations, technology and changes in consumer preferences,’ BP chairman Helge Lund said in a statement. ‘And in these transforming markets, bp can compete and create value, based on our skills, experience and relationships.’

‘We are confident that the decisions we have taken and the strategy we are setting out today are right for BP, for our shareholders, and for wider society,’ he added.

Without Exxon, the Dow Jones only remaining oil and gas company is Chevron.

WTI: technical analysis

Oil has finally found the strength to move higher, rallying through $43. Above $43.66, the price will have made a new higher high in the current uptrend, reinforcing the bullish view, according to Chris Beauchamp, chief market analyst at IG.

‘Alternately, a reversal below $41.50 is the catalyst that bears will be looking for,’ he added.

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