|Bid||74.99 x 800|
|Ask||75.00 x 3100|
|Day's Range||74.74 - 75.88|
|52 Week Range||61.80 - 79.42|
|PE Ratio (TTM)||N/A|
|Expense Ratio (net)||0.14%|
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.
With second-quarter earnings season fast approaching, investors may want to consider sector exchange traded funds. The Energy Select Sector SPDR (NYSEArca: XLE), the largest equity-based energy exchange ...
Between July 9 and July 13, 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 Short-Term Energy Outlook on July 10. The IEA (International Energy Agency) is scheduled to release its Oil Market Report scheduled on July 12. These reports could influence oil and natural gas prices for the next few weeks.
Strong economic fundamentals and higher oil prices could bolster energy sector ETFs in the earnings season ahead. “From an earnings standpoint, energy probably will grow earnings about 130 percent, and I didn’t misstate that: 130 percent,” PNC's former global chief investment strategist, Bill Stone, said on CNBC. According to FactSet, for the second quarter of 2018, the estimated earnings growth rate for the S&P 500 is 20.0% and if 20.0% is the actual growth rate for the quarter, it will mark the second highest earnings growth since Q3 2010 of 34.0%.
The S&P 500 Index rose ~0.86% to 2,736.61 on July 5. The US and the European Union might agree to withdraw automobile-related tariffs. The news supported the S&P 500 on July 5. Ten out of the 11 major sectors in the S&P 500 rose on the same day.
The S&P 500 rose ~0.85% to 2,759.82 on July 6, its highest level in two weeks. Better-than-expected US jobs data eased fears surrounding escalating trade tensions between the United States and China, which supported the index on July 6. All the key sectors in the S&P 500 advanced on the day.
MARKET PULSE U.S. stocks opened solidly higher Monday, following global markets that were trading in the green, as investors appeared to shift focus from worries of a full-scale trade war between China and the U.
The implied volatility in Anadarko Petroleum (APC) is ~31.6%—6.86% higher than its 15-day average of 29.57%. In comparison, the Energy Select Sector SPDR ETF (XLE) has an implied volatility of 20.2%—7.67% higher than its 15-day average of 18.76%.
In the week starting July 2, crude oil (USO) prices have fallen marginally. Crude oil prices fell from last week’s close of $74.15 per barrel on June 29 to $74.14 per barrel on July 3, a decrease of 0.01% so far. On July 3, crude oil prices made a 52-week high of $75.27 per barrel.
The S&P 500 rose ~2.94% to 2,718.37 during the second quarter. Strong first-quarter earnings results and the reduced corporate tax supported the S&P 500 during the same period. However, trade wars and the US interest rate hike restricted the upside for the S&P 500 during the second quarter. The SPDR S&P 500 ETF (SPY) rose ~2.1% to $271.28 during the second quarter. SPY targets to track the performance of the S&P 500 Index.
As of the week ended June 29, the US rig count was 1,047, up 5% compared to the week ending March 30. An increase in the US rig count could step up Schlumberger’s (SLB) revenues and earnings growth in the second quarter.
The natural gas rig count stood at 187 last week, one fewer than in the week prior. The natural gas rig count has fallen ~88.4% from its record level of 1,606 in 2008. However, US natural gas marketed production rose ~45.8% between January 2008 and April 2018, despite the natural gas-targeted rig count falling steeply. Consequently, natural gas active futures have fallen 63.4% since January 2008.
On July 3, the API (American Petroleum Institute) released its oil inventory report after the crude oil futures settlement for that day on NYMEX. The API reported that US crude oil inventories fell by 4.5 MMbbls (million barrels) to 416.9 MMbbls on June 22–29.
Instead, there are some specific market sectors that offer better performances for a much more sizzling return for this summer and into the fall. This has affected both global oil prices as tracked by Brent crude price and West Texas Intermediate (WTI) for U.S. crude.