Why did oil companies fall by more than 7%? – Money Times

Petrobras
Oil companies plunge more than 7% on Friday (Image: REUTERS/Vasily Fedosenko)

Amid escalating global inflation and the need to raise interest rates by the international monetary authorities, the most cyclical sectors have performed worse than Ibovespa (IBOV), which closed this Friday (17) down 2.84%at 99,887 points.

The sector’s stocks petroleum were one of those responsible for pulling the main index of the Brazilian Stock Exchange to the downside in today’s trading.

At closing, the 3R Petroleum (RRRP3) collapsed 9.38%, quoted at R$ 36.80, followed by PetroRio (PRIOR3), which fell 8% to R$ 23.24.

The papers of Petrobras (PETR3; PETR4) appear soon after, with drops of 7.31% and 6.88%, worth R$ 29.91 and R$ 27.08, respectively.

Following the same negative tide, the oil price plummeted on this turbulent Friday, for fear of recession and falling price of Gasoline in the USA, losing the level of US$ 120.00.

The futures contracts Brent closed down 5.58%, at US$ 113.12 a barrel, while oil WTI (traded in the US) lost $8.03, or 6.83%, to $109.56. That was the lowest close for Brent since May 20 and the lowest for WTI since May 12.

Why did stocks plummet? Is it time to buy?

According to analysts at Activate Investmentsfor Petrobras, even though the political issues intensify the asymmetries and contribute to a further decline in the stock, the main motivation for the bearish movement continues to be the adaptation of the markets to the new conjunctural reality triggered by the latest activity figures and prices released globally.

Despite this, given the escalating perception of global riskanalysts see no reason to fully deconstruct the positive outlook on the oil sector.

The analysts’ view takes into account the current compressed supply and strong demand, which, although absorbing the negative effects of the current shock, “it is premature to state their dimension and duration”.

In this way, Ativa continues to believe that the sector presents companies with valuation discounted prices and favorable dynamics against domestic cyclicals and some non-cyclical sectors.

“We will therefore maintain, for now, our current purchase recommendations for Petrobras and Petrorio, waiting for the consolidation of key variables, such as the international price of a barrel, before we promote any changes in our current positioning”, they reiterate.

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