After being range-bound between $50 and $55 per barrel for over a quarter, volatility in the energy sector has returned. Beginning last Tuesday, crude futures began a precipitous fall after both the API and EIA reported alarming crude inventory increases. The fall continued this Monday and early Tuesday as traders scrambled to unwind some of their long positions.
Fortunately, this week’s EIA report was better than expected, and the 800 pound gorilla in the room, Saudi Arabia, hinted that it wanted to see the OPEC oil cuts extended. Due to those circumstances, crude futures ended up the week modestly higher. In this article, we will dive deeper into the events that transpired in the energy sector and also analyze how Transocean LTD (NYSE:RIG), SM Energy Co (NYSE:SM), Exxon Mobil Corporation (NYSE:XOM), BP plc (ADR) (NYSE:BP), and Tesla Inc (NASDAQ:TSLA) each performed this week.
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As previously mentioned, crude futures fell earlier this week due to continued momentum from last week’s disastrous EIA report. Futures dropped even more after data showed that Saudi Arabia had pared some of its cuts for the month of February and OECD inventories had increased by 48 million barrels in January. Crude futures reversed their declines, however, after the EIA reported that U.S. commercial crude oil inventories inched lower by 0.2 million barrels to 528.2 million. Total commercial petroleum inventories also dropped by 7.8 million barrels. Sentiment improved further after Saudi Energy Minister Khalid Al-Falih said in a Bloomberg Television interview that OPEC would extend their current cuts if oil stockpiles are ‘still above the five-year average’ presumably next time OPEC meets on May 25. The original OPEC cut is slated to expire in June.
Given the EIA report and the Energy Minister’s comments, the offshore sector rebounded slightly this week, with Transocean LTD (NYSE:RIG) inching up 1.7% for the five days. Large integrated companies such as Exxon Mobil Corporation (NYSE:XOM) and BP plc (ADR) (NYSE:BP) mostly held their value. Exxon rose 0.45% while BP inched down 0.15%, with a significant percentage of both investor bases holding on to shares for the dividends. Shareholders of SM Energy Co (NYSE:SM) weren’t so lucky, as the stock fell 5% this week. Although bulls believe SM Energy’s acreage in Texas is very competitive, bears think the company overpaid for its acquisitions and may have taken on too much debt to do so.
Of the 742 elite funds we track, 29 funds owned $366.53 million of Transocean LTD (NYSE:RIG) and accounted for 6.40% of the float on December 31, versus 35 funds and $457.06 million respectively on September 30. Meanwhile, 60, 32, and 26 elite funds owned Exxon Mobil Corporation (NYSE:XOM), SM Energy Co (NYSE:SM), and BP plc (ADR) (NYSE:BP) at the end of 2016.
On the next page, we examine the events that occurred to Tesla Inc this week.