Reason behind Denbury Resources performance
On February 16, 2016, Denbury Resources (DNR) fell around 8.0% and made a new 52-week low of $1.02. It also emerged as SPY’s bottom performer on the day. The stock fell after the news of production freeze talks between Saudi Arabia and Russia.
DNR operates with a production mix of 94.8% in crude oil. Crude oil’s price is waiting to rally on news of a production cut, not a production freeze.
A production freeze does not guarantee an end to the supply glut in the oversupplied market. Moreover, West Texas Intermediate crude March futures also contracted by 1.4% on February 16, 2016, putting an end to the previous week’s rally.
On Friday, February 12, 2016, West Texas Intermediate crude jumped 12.3% on the hope of a production cut deal. However, the two leading producers of crude oil, Saudi Arabia and Russia (RSX), ended the meeting only with a production freeze at January record levels. Goldman Sachs (GS) also insisted that the production freeze couldn’t sour the price of crude oil.
SPY’s bottom performers
On February 16, 2016, the stocks at the bottom of the SPDR S&P 500 ETF (SPY) were Denbury Resources, Range Resources (RRC), and American International Group (AIG). These stocks yielded -8%, -5.2%, and -1.8%, respectively.
To learn more, read Why Materials, Energy Led S&P 500’s Earnings and Sales Surprises.