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Why Whiting Petroleum Stock Has Continued to Take a Beating

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Whiting Petroleum stock

Whiting Petroleum (WLL) stock continued to worsen last week as crude oil prices remained at sub-$50 levels. On March 21, 2017, WLL fell ~5% following a 1.8% fall in crude oil prices on the same day.

Whiting Petroleum stock has returned -35% since the beginning of the year. It underperformed the Energy Select Sector SPDR ETF (XLE). XLE saw a return of -10% during the same period. The broader market S&P 500 ETF (SPY) had a return of ~3.8%.

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Why the weakness in crude oil prices?

Oil prices have remained weak due to global supply glut concerns. This has investors worried about OPEC’s (Organization of the Petroleum Exporting Countries) production cuts being offset by rising US supplies. On March 21, the American Petroleum Institute reported a rise of ~4.5 MMbbls (million barrels) in crude oil inventories for the week ended March 17, 2017.

On March 22, the EIA (U.S. Energy Information Administration) reported that US inventories had increased by 5 million barrels in the week ended March 17. Read Is $30 for Crude Oil Coming? for more insight into crude oil’s price movements.

Another key factor affecting oil prices is rising US rig counts. Check out This Could Make Oil Prices Collapse for more information.

The above chart shows that Whiting Petroleum stock has been mirroring crude oil prices. Investors should closely track the impact of indicators such as oil rig counts and crude oil inventories on oil prices, along with the consequent impact on WLL’s stock.

Could there be another factor?

Whiting Petroleum stock also may also have been seeing bearish trends due to its planned ~96% increase in 2017 capital expenditure compared to its capex in 2016. 

Whiting Petroleum’s production expectation hasn’t risen concurrently with its increased capex. The market has likely reacted negatively to this disproportionate rise.

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