74.58 -0.55 (-0.73%)
Pre-Market: 5:15AM EDT
|Bid||0.00 x 1100|
|Ask||0.00 x 1000|
|Day's Range||73.98 - 75.24|
|52 Week Range||61.80 - 79.42|
|PE Ratio (TTM)||N/A|
|Expense Ratio (net)||0.14%|
According to the EIA (U.S. Energy Information Administration), natural gas inventories rose by 51 Bcf (billion cubic feet) to 2,203 Bcf in the week ended July 6. In the past five years, natural gas inventories have risen by an average of ~77 Bcf at this time of the year. However, on July 12, natural gas August futures fell 1.1% because of supply concerns.
Anadarko Petroleum (APC) stock has been on a significant uptrend this year due to the rally in crude oil prices (DBO). Anadarko Petroleum was also supported by strong first-quarter earnings. In the fourth quarter of 2017, Anadarko Petroleum’s EPS was positive for the first time since the first quarter of 2016.
August WTI oil futures contracts fell 0.7% in early morning trading on July 18. Brent and WTI crude oil futures rose ~0.5% and ~0.03%, respectively, on July 17.
The S&P 500 rose ~0.4% to 2,809.55 on July 17—the highest closing since February 1. The index rose due to Fed Chair Jerome Powell’s bullish comments about strong US economic growth. The expectations of strong second-quarter earnings results also helped the index.
Oil exploration and production companies, which took the brunt of the hit during the crude selling, have benefited the most as prices rebounded, but ETF investors should begin to think about taking a more ...
The Energy Select Sector SPDR (XLE) , the largest equity-based energy ETF, is up about 5% year-to-date, but XLE and rival energy ETFs will be tested as the sector's second-quarter earnings reports start rolling in. “Q2 estimates moved up modestly since the quarter got underway, but the positive revisions were primarily because of the Energy sector. Excluding the Energy sector, estimates for the quarter would be modestly down in the last 10 weeks,” according to Direxion.
Hedge funds’ net bullish positions in US crude oil futures and options decreased 0.1% to 433,938 on July 3–10. However, the positions are near the highest level since April 17. The positions increased by 255,284 contracts or 143% YoY (year-over-year). Hedge funds’ net bullish positions in US crude oil futures and options suggests that they remain bullish towards oil prices.
The outlook for crude-oil prices has been clouded by a bevy of concerns on both the supply and the demand sides. All that news has weighed on oil prices, pushing the global benchmark Brent crude down to near $72 per barrel, the lowest point since early April. Goldman Sachs' analyst Damien Courvalin wrote in a report published Monday: "Ultimately, global inventories are low, oil demand remains robust and we still expect a deficit once U.S. secondary sanctions are reintroduced.
WTI crude oil prices hit $74.15 per barrel on June 29—the highest level since November 2014. However, Brent and WTI oil prices fell 5.2% and 4.2%, respectively, during the last two weeks. WTI oil prices fell 3.8% last week. However, the Energy Select Sector SPDR ETF (XLE) rose 0.8% last week. The companies in XLE develop and produce crude oil and natural gas and other energy-related services.
The S&P 500 Index rose ~0.11% to 2,801.31 on July 13—the highest closing since February 1. The expectation of strong second-quarter earnings results has been driving the S&P 500. However, the escalating trade war between the US and China has limited the upside for the S&P 500. Six out of the 11 key sectors in the S&P 500 advanced on July 13.
Offshore drilling (XLE) companies are capital-intensive, so looking at their financial leverage is very important. The debt-to-equity ratio and net debt-to-EBITDA ratio show these companies’ financial leverage. A higher ratio means higher financial leverage and higher financial risk.
Although US steel prices and physical aluminum premiums have spiked this year after the Section 232 tariffs, metal prices have been largely subdued. Recently, seaborne iron ore prices fell to a multi-month low. Aluminum, zinc, and copper have also come under pressure amid concerns about the US-China trade war. Gold (GLD), which is generally seen as a safe-haven asset, has also been subdued. However, energy prices (XLE) have shown strength amid supply-side concerns due to looming Iran sanctions.
The summer of 2018 should've been the most bullish period for crude in several years, but both Brent and West Texas Intermediate have taken a beating on mounting concerns about what could disrupt equilibrium. Energy stocks have also taken a hit with the Energy Select Sector SPDR (XLE) notching a 1.2% decline. The negative implications for crude prices are hard to ignore.
On July 16–20, the events listed in the following table could impact oil and natural gas prices. The EIA (U.S. Energy Information Administration) is expected to release its monthly drilling productivity report on July 16. The report could influence oil and natural gas prices for the next few weeks.
MARKET PULSE Crude-oil prices early Monday were trading sharply lower, with the U.S. benchmark on track to drop beneath a key short-term level that could imply near-term momentum for the commodity is eroding.
Jeffrey Gundlach: We are more cautious about 2019 than about this year. The one indicator that is somewhat negative is the yield curve, which has flattened pretty relentlessly for the past year or two as the Fed has been tightening. There’s a narrative out there that says the flattening yield curve isn’t sending any message about a recession, and that couldn’t be more wrong.
Anadarko Petroleum (APC) stock has risen significantly this year. The stock has risen 37.8% year-to-date and 73.14% on a YoY (year-over-year) basis. In comparison, the broader industry represented by the Energy Select Sector SPDR ETF (XLE) has increased ~20.48%, while the broader market S&P 500 SPDR ETF (SPY) has risen 15.07% during the same period.
MLPs had a strong second quarter this year after several quarters of sluggish performance. The Alerian MLP Index (AMZ) rose 10.0% in Q2 2018, supported by higher crude oil prices, strong US drilling activity, and most importantly, MLPs’ strong earnings growth. According to Goldman Sachs Asset Management, in the first quarter of 2018, “Of the total 42 AMZ constituents, 34 constituents, or 81%, either met or beat consensus expectations.”
On July 11, the EIA (U.S. Energy Information Administration) released its weekly crude oil inventory report. The EIA reported that US crude oil inventories decreased by 12.6 MMbbls (million barrels) to 405.3 MMbbls on June 29–July 6—the largest weekly decline since September 2, 2016. The inventories are also near the lowest level since February 20, 2015. The inventories dropped by 90 MMbbls or 18.2% year-over-year. A Reuters survey estimated that US crude oil inventories could have declined by 4.5 MMbbls on June 29—July 6.
The S&P 500 Index fell ~0.7% to 2,774.02 on July 11. On the same day, the US government threatened to impose new tariffs on goods worth $200 billion imported from China. The escalating trade war between the US and China pressured the S&P 500 the same day. China warned the US and said that it would take strict countermeasures. Ten out of the 11 key sectors in the S&P 500 dropped on July 11.
Energy had a rough start to the year, but the sector has since bounced back, and exploration and production companies have seen the lion's share of the gains, with SPDR S&P Oil & Gas Exploration & Production (XOP) up 15.8% year to date, more than three times the Energy Select Sector SPDR ETF's (XLE) 5% gain. Certainly, crude prices have turned higher, which is a help, but that's not the only thing going on here. Energy stocks, including formerly spendthrift E&P companies, have also shown more capital discipline in a way that's inspiring investors. Morgan Stanley's Devin McDermott cites these factors and others in his bullish initiation of the large-cap E&P sector Thursday, writing that "the stage is set" for these companies to deliver strong free cash flow and capital returns "supporting continued strength in the group." He writes that after years of spending beyond their means and disappointing investors, E&P companies are finally reaping the benefits of higher oil prices and lower supply costs, and while the tide has turned, plenty of investors haven't realized that it's time to get back into the sector.
The WTI crude oil futures contract fell more than 5% before bouncing into Wednesday afternoon's North American session, posting the biggest one-day decline in 13 months. The reversal has unfolded at long-term Fibonacci and pattern resistance, possibly signaling a multi-year top. Major energy funds have diverged from the futures contract in recent months, stalling at 2016 resistance in January 2018 and dropping into sideways patterns while international trade tensions put a damper on buying interest.
Whiting Petroleum (WLL) stock has risen ~96% YTD on strong crude oil prices (DBO) and strong first-quarter earnings. With oil prices continuing to rise in the second quarter, Whiting’s financial results should follow suit, which could provide a further boost to the stock. Higher oil prices are helping to bridge the gap between capital expenditure and operating cash flows, resulting in positive free cash flows for two consecutive quarters.