Why ConocoPhillips Stock Dropped on Monday
Key Points
Oil prices tumbled as much as 5% Monday as tensions cool in the Middle East.
Oil prices are still high and Conoco's share price looks low.
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Oil prices dipped in Monday trading, with Brent crude falling 4.7% to about $66 a barrel and WTI crude down nearly 5% to just under $62.
ConocoPhillips (NYSE: COP) stock slipped 2.5% through 10:30 a.m. ET Monday, following the price of oil lower.
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Why is oil getting cheaper?
The OPEC+ group of oil-exporting countries ("plus" Russia and a few others) announced last night that, despite "healthy oil market fundamentals as reflected in low inventories," it will extend its pause on production increases into March (i.e., not increase production in February).
You'd think that would be a double-whammy of good news for oil prices -- low inventories should mean high prices, and no increase in production should mean those prices will remain high. Instead, oil prices are falling today.
Why?
OilPrice.com notes that oil prices recently surged past $70 a barrel amid concerns that a looming U.S. military conflict with Iran could disrupt oil supplies from the Persian Gulf. Over the weekend, however, tempers cooled a bit, and there's talk of negotiations between the U.S. and Iran over the latter's nuclear program -- and so long as people are talking, they're presumably not shooting and interrupting supplies.
Result: The immediate catalyst for rising prices has been removed, leading to a price decline.
What this means for ConocoPhillips stock
It's logically also causing the stock price of ConocoPhillips to fall, because the primary product it sells is now worth a bit less. (There's also talk of an oil glut on the market, despite OPEC's protestations to the contrary, and that's also a negative for oil prices and oil stocks.)
The good news is that at less than 15 times earnings and with a dividend yield over 3%, Conoco stock is looking pretty cheap right now.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends ConocoPhillips. The Motley Fool has a disclosure policy.
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