Six weeks ago, we took a deep dive into the absolute and relative performance of the S&P 500's energy sector. At that point, we concluded that, "[w]ith this year's breakdown from the 2016's "bearish flag" pattern, the long-term underperformance of energy stocks could carry over through 2017 and beyond." Updating the relative performance chart from that early May piece suggests that, if anything, the outlook for energy stocks has worsened with the latest drop in oil prices.
New York Attorney General Eric Schneiderman is investigating Exxon Mobil Corp's accounting practices and why the oil major hasn't written down the value of its assets in the wake of a slump in oil prices, a person familiar with the matter said.
Global crude oil supplies are at a record 3.0 billion barrels, according to International Energy Agency in what they call an “unprecedented buffer.” This comes the day after oil prices were hit hard after the Energy Information Administration reported crude oil inventories grew by 4.2 million barrels last week driving inventories to 487 million barrels and driving U.S. supply to a near record high. This was led by crude oil imports that rose to 7.377 million barrels a day.
While crude oil prices in the short term are fixed on the Fed and current oversupply, in the big picture it may be time to party like its 1999. In 1999 oil prices had just come off a year (1998) where oil prices had dipped as low as $10.35 per barrel and there was doom and gloom across the energy space. Yet in hindsight oil in 1999 was at a historic turning point and a major bottom that changed the energy landscape for over a decade.
Even with the recent rebound in the price of crude oil, don't look for production cuts to stop. Oil is breaking out as it is clear that crash in oil prices significantly changed the fundamentals and the future production growth curve.