By Avi Salzman

Oil prices have been sliding, and investors are bearish. But they may not be bearish enough. Despite a rally to $61 a barrel by Friday, U.S. benchmark West Texas Intermediate crude was still far off the January high of $78. "We think WTI near $50 per barrel is likely the next key level on the current trajectory," wrote RBC Capital Markets strategist Brian Leisen.

Oil has supply-and-demand problems. OPEC and its allies are ramping up supply faster than expected, with daily production set to rise by nearly a million barrels by June from March. OPEC wants to regain market share from countries such as the U.S., and seems willing to endure lower prices to make it happen. And demand isn't rising fast enough to sop up extra supply. Global oil demand in April was flat with year-ago levels, says J.P. Morgan.

That means there's no easy way out of this slump. Most other sectors only face demand pressure, mostly from tariffs. If they go away, those sectors could be in the clear, but energy would still face a glut. Bullish energy investors are hoping U.S. producers pull back drilling operations, leading to a fall in U.S. output and lifting prices. So far, there are only moderate signs that's happening.

At $50 a barrel, most companies can still make money on operating wells. But they'll almost certainly spend less on policies like stock buybacks, and few will be able to drill new wells profitably. Analysts' earnings expectations have come down, but they may still have room to fall.

Write to Avi Salzman at avi.salzman@barrons.com

Last Week

Markets

On Monday, Brent crude fell to four-year lows as OPEC+ boosted output. The dollar slipped as Asian currencies, particularly the Taiwanese dollar, surged. President Donald Trump again urged the Federal Reserve to cut rates, but the Fed, as expected, stayed put while warning of rising risks. Stocks fell back, then rallied on news of U.S.-China talks and a U.S.--United Kingdom trade-deal framework. On the week, the Dow industrials fell 0.2%, the S&P 500 0.5%, and the Nasdaq Composite 0.3%.

Companies

Warren Buffett, 94, said he would step down as CEO of Berkshire Hathaway at year end, handing the baton to Greg Abel. Trump said he would slap 100% tariffs on foreignmade movies, but details were vague. The administration blocked Harvard from federal research grants. OpenAI retreated from its plan to become a for-profit company. Ford Motor pulled guidance, warned that tariffs would produce a $1.5 billion profit hit, and raised prices. Mattel said it was moving more production from China and planning to raise prices. Walt Disney announced a new theme park in Abu Dhabi.

Deals

DoorDash agreed to acquire Deliveroo for $3.9 billion in cash...Bloomberg reported that OpenAI was buying AI-assisted coding tool Windsurf for $3 billion...3G Capital said it would buy Skechers USA for $9.4 billion...Rite Aid entered Chapter 11 and began liquidating...Sunoco said it was buying Canadian fuel distributor Parkland for $9.1 billion.

Next Week

Monday 5/12

More than 450 S&P 500 companies have reported first-quarter earnings, with nearly 80% beating earnings-per-share estimates and about 60% besting sales projections. Simon Property Group kicks off the week, reporting results on Monday, followed by Cisco Systems on Wednesday. Applied Materials, Deere, and Walmart announce their earnings on Thursday.

Tuesday 5/13

The Bureau of Labor Statistics releases the consumer price index for April. Economists forecast a 2.4% year-over-year increase. The core CPI, which strips out volatile food and energy prices, is expected to rise 2.8%. Both estimates would match the March data. The annual change in the March core CPI was the lowest in four years.

Thursday 5/15

The Census Bureau reports retail sales data for April. Consumer spending is expected to be flat month over month, after a 1.5% jump in March.

Friday 5/16

The University of Michigan releases its consumer sentiment survey for May. April's 52.2 reading was the lowest since July of 2022, while consumers' year-ahead inflation expectations, 6.5%, was the highest since 1981.

The Numbers

76%

The percentage of 138 U.S. air-traffic control systems deemed obsolete or potentially too difficult to maintain.

1,900

The number of suppliers from a dozen countries for Lockheed-Martin's advanced F-35 fighter plane.

31%

Percentage of Internal Revenue Service auditors who have taken buyouts or were recently fired.

68%

The increase in trade between Russia and China from 2021 to 2024. Last year saw a record $245 billion.

Write to Robert Teitelman at bob.teitelman@dowjones.com

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May 09, 2025 19:51 ET (23:51 GMT)

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