This Week in Energy: Bear Case For the Near-Term

Page 2 of 2

Given that the offshore drilling sector has been beaten up and highly-shorted, Transocean LTD (NYSE:RIG) and Seadrill Ltd (NYSE:SDRL) each rallied by around 17% this week. Some shorts were likely caught off-guard by OPEC’s agreement and had to cover their shares as a precaution. How long the short rally can last is difficult to say. The $50 WTI level has been very strong resistance for some time, and it is unclear how long the optimism can last. If Brent prices can’t make their way to $55 or $60, there is potential for the offshore drillers to be laggards in a rally, as many analysts believe offshore projects generally cost more than shale projects. If crude prices continue surging and rally past the $60 mark however, many offshore investors will benefit.

Follow Transocean Ltd. (NYSE:RIG)

According to our data, 17 funds were long Seadrill Ltd (NYSE:SDRL) at the end of the second quarter, while 32 were bullish on Transocean LTD (NYSE:RIG), down from 39 a quarter earlier.

Follow Seadrill Ltd (NYSE:SDRL)

Are you bullish or bearish on oil prices in the short to medium-term? Let us know in the comments.

Disclosure: None

Page 2 of 2