Oil Stocks Fall as Europe Considers Tapping Reserves: CVX, OXY, MPC

Stocks of leading oil producers are falling amid reports that the European Union is considering releasing diesel fuel and possibly crude oil from its reserve supplies. The U.S. has called on Europe to immediately release some of its diesel reserves as the price for the fuel hits an all-time high. Diesel prices in the U.S. have surged to a record high of $6.50 per gallon amid supply disruptions caused after the Trump administration attacked Iran earlier this year.

U.S. President Donald Trump is now pushing Europe to release some of its diesel reserves, saying that American farmers, truckers and businesses shouldn't carry the burden of global supply disruptions. If Europe fails to act, Trump said he will have no choice but to enact a diesel export ban as part of an attempt to prevent diesel prices from moving any higher.

The situation has the stocks of Chevron (CVX), Occidental petroleum (OXY), and Marathon Petroleum (MPC) trending lower on Oct. 2.

Would a Diesel Export Ban Work?

Economists have warned that an export ban on diesel fuel is unlikely to lower prices in the long run and could exacerbate the current problems. Trump is under political pressure to tackle soaring fuel prices ahead of the midterm congressional elections this November, where affordability has become a top-of-mind issue for voters.

The prospect of the U.S., which is the world's biggest diesel exporter, implementing a ban has raised concerns in Europe. The U.S. supplies nearly half of the European Union's diesel imports, according to the International Energy Agency. With winter approaching, Europe cannot afford a U.S. export ban on diesel fuel, say commodities analysts.

France to the Rescue?

Member states from the European Union are scheduled to hold an emergency meeting on Oct. 2 aimed at developing a coordinated response to soaring diesel prices and the demands from Trump. France has reportedly proposed that the European Union release 50 million barrels of diesel fuel and possibly 50 million barrels of crude oil.

Unlike the U.S., Europe is a net importer of energy products that include gasoline, diesel and natural gas. Concerns are growing in Europe about energy costs heading into the autumn and winter months when heating homes and businesses will become an issue. The latest inflation report for Europe, released on Oct. 2, showed that energy prices rose 18.8% year-over-year in September as the Iran war drives prices higher.

Is CVX Stock a Buy?

Chevron's stock has a consensus Strong Buy recommendation among 17 Wall Street analysts. That rating is based on 13 Buy and four Hold recommendations issued in the last three months. The average CVX price target of $216.50 implies 3% upside from current levels.