“A growing number of analysts expect that many of the world’s leading economies will experience negative growth in the coming months, which will drag the US into recession,” Fawad Razaqzada, market analyst at City Index, told Bloomberg. “In the very short term the Dow & S&P will play a major factor in the direction of crude as recession fears remain,” BOK Financial’s Dennis Kissler told Bloomberg. He also expressed concerns that fuel demand could “fall off significantly now that the July 4th holiday is behind us.” A heavy dollar has also not helped oil and commodity prices as the top currency remains the world’s preferred safe haven during these turbulent times. “A flood of funds in US dollars, which he has sent [the dollar] The bounce … appears to be bringing a headwind to commodity prices,” Colin Cieszynski, head of market strategy at SIA Wealth Management, told MarketWatch. Not surprisingly, energy stocks are getting hammered in the latest selloff, with Halliburton Company (NYSE: HAL ) -8.1%, APA Corporation (NASDAQ: APA ) -7.4%, ConocoPhillips (NYSE: COP ) -6 .9% and Hess Corp. (NYSE: HES ) -6.8% the biggest decliner. Citi analysts have warned that crude prices could collapse to $65/barrel this year in the event of a downturn. Experts say oil prices could fall even lower to $45 in another year as supplies remain, but a global economic slowdown is causing demand to decline. Fortunately for the bulls, the bank has placed a mere 10% chance on this outcome. However, Citi is clearly in the bear camp and has assigned a 50% chance of Brent crude falling to $85/barrel by the end of 2022. Limited downside Indeed, bullish sentiment in oil markets remains strong despite the latest correction, with many analysts saying the downside for crude should remain limited by tight supplies. “While there are concerns about demand due to the gloomier macroeconomic outlook, the market is still expected to be tight for the rest of the year. OPEC+ producers have limited room to increase production significantly and so are unable to offer much relief in the market.” says ING’s chief commodity strategist Warren Patterson. Although the oil price rally appears to have stalled over the past month, limiting further gains for the energy sector, a segment of Wall Street believes oil prices still have plenty of upside. One such bull is JP Morgan Chase, which last week warned that global oil prices could rise to a “stratospheric” $380/barrel if G7 countries succeed in imposing price caps on Russian oil and push Vladimir Putin to impose retaliatory production cuts. According to JPM, Russia’s strong fiscal position means the country can afford to cut crude output by up to 5 million bbl/d without hurting its economy too much. However, such a drastic reduction would be bad news for oil consumers as it would push Brent crude prices to $380/barrel. “The most obvious and likely risk with a price cap is that Russia may choose not to participate and instead respond by cutting exports,” “It is possible that the government could retaliate by cutting production as a way to inflict pain on West. Global oil market tightness is on Russia’s side,” JPM analysts wrote. Smart investors seem to agree: three energy gurus led by Warren Buffett himself have chosen to follow Oracle’s time-tested market wisdom of being fearful when others are greedy and greedy when others are fearful. In recent weeks, Buffett, Jerry Jones and Harold Hamm — three of the richest and most successful businessmen in the US — have doubled down on their bets on oil and gas, using the selloff as a buying opportunity. Between June 17 and June 22, Buffett bought 9 million shares of Occidental Petroleum (NYSE:OXY) for about $56 per share, which compares favorably to OXY’s previous purchase in the $50-$58 range. In fact, Buffett now owns 25% of OXY, counting the warrants and total stock he bought. The Oracle of Omaha also owns a $20 billion stake in Chevron Corp. (NYSE:CVX). Warren Buffett ranks as the 7th richest man in the world with a net worth of $96.9 billion. Unfortunately, Buffett saw his net worth shrink by $13.4 billion year-to-date, largely due to the poor performance of his other US stock investments, thanks to a big market selloff. Several weeks ago, the Wall Street Journal featured Dallas Cowboys owner Jerry Jones in a story detailing how the billionaire raised his $1.1 billion investment in natural gas producer Comstock Resources Inc. (NYSE:CRK) to $2.7 billion. Interestingly, Jones bought control of Comstock Resources in the depths of the natural gas crash before gas prices took a dramatic turn. Jerry Jones is #182 on the Bloomberg Billionaires Index with a net worth of $10.7 billion, up nearly 15%. Meanwhile, Harold Hamm, principal owner of shale exploration giant Continental Resources (NYSE:CLR), has launched an all-out war to buy a minority stake in the company. Earlier this month, Hamm offered to buy the rest of the shale driller he and his family don’t already own for $4.3 billion, or $70/share, claiming his company is grossly undervalued. The Hamm family collectively owns 83% of the total outstanding shares of common stock. By Alex Kimani for Oilprice.com More top reads from Oilprice.com:
