Energy companies are taking a step back this month after surging since the beginning of the year. Meanwhile, an Halliburton stock forecast shows it’s leading the downfall, down 33% this past month.

Halliburton (NYSE: HAL) is one of the energy industry’s largest product and service providers. In fact, the company leads the North American market while expanding its international presence.

The latest Consumer Price Index (CPI), a common index for tracking inflation, rose unexpectedly to 9.1% in June. Even though energy prices have cooled in the past month, they are still up significantly from last year.

At the same time, gas and oil stocks are down after hitting a three-year high. For example, the SPDR S&P Oil and Gas E&P ETF (NYSE: XOP) is down 25% this month after rallying over 75% in 2022.

Oil companies are often grouped into three categories:

• Upstream
• Midstream
• Downstream

Halliburton is primarily an upstream company providing drilling and extracting resources. Yet, the company has some mid and downstream businesses.

With energy supply still a concern, is it time to buy Halliburton stock? Or will recession fears cool demand for gas and oil? Keep reading for more on Halliburton stock forecast and discover what to expect next from the largest North American E&P company.

Why Halliburton Stock Is Down This Month

Like most energy companies, Halliburton stock is selling off steeply this month. With fears of a recession rising, investors are selling energy stocks like its 2008. On top of this, China’s Zero Covid policy is slowing global demand. China is the second largest global oil consumer, behind the U.S.

During the global financial crisis, the XOP ETF dropped almost 44% in 2008 as energy demand sharply declined. Energy prices heavily influence Halliburton’s business. Higher energy prices act as an incentive for drilling activity. As a result, when oil prices are higher, Halliburton sees more business.

Will it Be the Same This Time Around?

For one thing, oil prices are down off their highs, sitting around $100 per barrel. Prices at the pump are also down from record highs of over $5. With this in mind, the big question will be, is this the new trend? Or is it just a pullback on the road to even higher prices?

Analysts are split. Citigroup’s (NYSE: C) Ed Morse calls for Brent oil to fall to $75 next year and $50 following that. But Morgan Stanley’s (NYSE: MS) Global Commodity Strategist is calling for $130 by the third quarter.

The Bullish Case for Halliburton Stock Forecast

Halliburton stock is still up close to 20% YTD, while most asset classes have lost significant value. However, recent weakness has caused HAL shares to lose over a third of their value. Since hitting a three-year high in June, HAL stock is down 35%.

China’s strict COVID-19 policies and concerns over economic growth are working as headwinds. But there may be reasons to believe these are just short-term hurdles compared to the bigger picture.

Here’s why:

• According to reports, China is starting to ease restrictions. Higher energy demand from China can push the market back up.
• Supply is still a concern. During the pandemic, over 100 oil and gas companies went bankrupt. Furthermore, sanctions on Russian oil, the third largest oil producer, are driving global supply concerns.
• Increasing supply can take time. After many years of underinvestment, the ability to increase supply is limited.

Furthermore, strategic reserves are being drained as nations look to fill the supply gap left by Russian oil. In May, the U.S. Strategic Petroleum Reserve fell to its lowest since 1987. Since then, we have released close to another 50 million barrels.

The reserves will need replenishing in the coming years. Not only that, but the IEA forecasts oil demand will pick up next year regardless.

All of these are bullish factors that could help Halliburton stock get back on track. But there are a few risks to consider first.

Keep reading for more on Halliburton stock forecast.

The Bearish Case

Despite positive industry tailwinds, Halliburton stock is falling for a reason. And the reason is fear of a recession if we are not already in one.

The Federal Reserve has held its stance on fighting inflation, no matter the cost. Meanwhile, oil and gas prices are the leading factors driving inflation up. So, in reality, the fed is fighting energy prices, which are market driven.

To drive market-driven commodity prices down, there are one of two options.

• Increase supply
• Decrease demand

As I have noted, increasing supply is a challenge. The U.S. is looking for solutions to increase supply. In fact, President Biden is traveling to Saudi Arabia, the world’s largest oil producer, this week. Though the trip is for other reasons, it’s symbolic nonetheless.

At the same time, the fed is increasing interest rates to slow demand. Higher interest rates help deter spending activity. But is it too much, too late?

The economy slowed in the first quarter. And the Atlanta Fed is predicting it to fall again in Q2. Though not technically a recession until the NBER says so, many see two falling quarters of GDP as a sign.

For one thing, if a recession happens, it slows energy demand. If demand falls, oil prices fall swiftly. In 2008, crude oil prices lost over 70% of their highs.

Lower oil prices are not ideal for Halliburton stock forecast as businesses are not likely to spend money on increasing supply. The opposite is true. Oil companies will spend less on projects while protecting their balance sheets.

Is Halliburton Stock a Buy or Sell?

Energy investors have a few critical factors to consider going forward. For one thing, your investing time frame will be a big part of the decision.

Short-term traders look for further signs of a recession, such as lower consumer spending and company layoffs. If a recession is triggered, oil prices are likely to fall further. And Halliburton stock forecast will continue seeing the worst of it.

At the same time, if you are investing three to five years, Halliburton stock may make sense. On the one hand, the strategic reserve will need refilling. On the other hand, demand expects to increase in the foreseeable future.

To meet the climbing demand, either the sanctions will need to be lifted, or supply will need to come from elsewhere. The U.S. is a leading choice to ramp output, but it can take time for this to happen.

The former is unlikely to happen. But, increasing supply is a realistic option. With Halliburton’s leading position in North America, the company can see activity pick up.

If oil prices remain elevated, more profits incentivize companies to increase drilling. As a result, Halliburton will be there to provide its products and services. Lastly, to prep your portfolio for a recession, check out the top stocks that do well in a recession.