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Global oil pricing worries hit U.S. energy shares as earnings loom

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In the third quarter, the profit of oil producers as a whole should be higher than a year ago, since the average price per barrel increased by about 44 percent compared to the same period last year. But oil prices on Friday recorded a third week-long recession, expanding weaknesses about the fact that slow global economic growth and the US trade war could trigger demand.

U.S. crude CLc1 is on the way to decline by about 8 percent per month, while the S & P 500 .SPNY index in October fell by 12.2 percent compared to the S & P 500 .SPX index by 8.8%. [.N]

In the third quarter, oil prices in the US of CLc1 were $ 69.43 per barrel, which rose sharply from $ 48.20 a year earlier. Analysts expect this to help increase the S & P 500’s quarterly profit by 102.9 percent, which is the largest annual growth expected by sector, according to I / B / E / S from Refinitiv.
This will be the largest annualized expected percentage growth in any sector in a quarter. However, some investors say that this may not be enough to reverse the trend in stocks, taking trade and other concerns into account.

"I expect that profits will be good because prices in the last quarter were good," said Rick Mekler, a partner at Cherry Lane Investments, a family investment office in New Vernon, NJ.

But "it was very difficult for these companies to predict pricing because it was so volatile,” he said. Companies that provide drilling and other work for US producers accuse of short-term slowdown in demand for services due to the pipeline and other constraints, especially in West Texas fields.

While US sanctions against Iranian oil exports may support prices in the coming months, the largest exporters of Saudi Arabia and Russia signal that they expect an increase in production, which should limit growth.
Upcoming profit and loss statements from Exxon Mobil (XOM.N) and Chevron (CVX.N), due on November 2, may reflect these problems. Exxon fell by almost 9 percent in the current month, while Chevron also fell by almost 9 percent.

"We have seen oil prices being sold here throughout the correction we had in the broad market. Competition in the sale, of course, is global growth, and this immediately affected the price of oil, ”said Tim Grisky, chief investment strategist at Inverness Counsel in New York.

UBS analysts expect oil demand to grow more slowly in 2019, at higher oil prices and weaker economic growth.

Another producer, Hess Corp (HES.N), has to report on Wednesday, while ConocoPhillips (COP.N), the largest independent producer of oil and gas in the world, beat analyst estimates for profit in the third quarter, when it reported on Thursday , quoting higher oil prices, but also reducing costs.

Recent losses aside, some capital analysts believe that oil is in a bullish cycle and expects prices to rise next year.
This year, energy stocks sharply outpaced oil prices, which suggests that there is room for further growth in stocks.

"People still think that we are worth $ 40 a barrel. We're not, ”said Robert Luts, president and chief investment officer of Cabot Wealth Management in Salem, Massachusetts, who owns diamondback energy shale maker Diamondback (FANG.O) and other names.

"People misjudge the balance between supply and demand,” said Lutts, who sees oil prices during the year from $ 80 to $ 90 per barrel. Crude oil settled at $ 67.59 on Friday.

Even with the recent sale of the price of CLc1 oil in the United States this year rose by about 11 percent, while the energy consumption index S & P 500 fell by about 8 percent in 2018, and market leader Exxon fell by about 7 percent.

Some money managers also believe that energy stocks are now more attractive, and investors are fleeing high-tech technologies and Internet names in a recent stock market sale and are looking for value names.
Others say it's too early for a bull call for energy.

"To achieve sustainable growth in oil reserves, where they consistently outperform other sectors and where the sector is actually growing as a component of the S & P 500, you need a lot of things, such as limiting supply and global growth.

We are not there now, ”said Bucky Hellwig, senior vice president, BB & T Wealth Management in Birmingham, Alabama.


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#1 10-12-2018 14:35
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