Comparing Integrated Energy Stocks’ and SPY’s Performance


Jul. 3 2017, Published 2:41 p.m. ET

Performance of integrated energy stocks

In 2Q17, BP (BP) stock rose 1.0%, the most among peers ExxonMobil (XOM), Chevron (CVX), and Royal Dutch Shell (RDS.A). XOM and CVX fell 1.6% and 3.0%, respectively, and Shell rose 0.9%. The SPDR S&P 500 ETF (SPY) and the SPDR Dow Jones Industrial Average ETF’s (DIA) rose 2.4% and 3.0%, respectively, meaning integrated energy stocks underperformed the market in 2Q17.

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West Texas Intermediate falls in 2Q17

Usually, integrated energy stock prices are highly correlated with crude oil prices, and a fall in WTI (West Texas Intermediate) prices is likely to pressurize these stocks. So far in 2017, WTI prices have fallen 16%.

The downtrend in oil prices is mostly due to oversupply concerns despite an OPEC (Organization of the Petroleum Exporting Countries) cut. In May 2017, oil prices rose in anticipation of a meeting between main oil producers. However, soon the uptrend reversed and the cut was deemed ineffective in dealing with oversupply concerns. Oil import demand is slowing in India, China, and Japan. On the other hand, Nigeria and Libya have witnessed a rise in oil production in 2017. US oil production is expected to increase in 2018. Overall, crude oil prices dropped by 11% in 2Q17. The Energy Select Sector SPDR ETF (XLE) fell 7.5% in the quarter.

Why the mixed performance in integrated energy sector stocks?

The fall in oil prices in 2Q17 likely took a toll on integrated energy stocks, which saw a trend reversal. In fact, XOM and CVX went into negative territory despite posting strong 1Q17 earnings and surpassing estimates. In 1Q17, XOM, CVX, Shell, and BP saw their upstream earnings switch to profit from a loss in 1Q16. The fall in stock prices was presumably due to fear that lower oil prices could impact integrated energy companies’ 2Q17 results.

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However, BP and Shell are still holding up, likely because of important upstream projects that began operations in the quarter. BP declared the start-up of two of its major upstream projects, West Nile Delta and Quad 204. BP is likely to see higher hydrocarbon output in 2H17 due to some of its critical projects commencing operation. For more on this, read Could BP Have a Growth Spurt in the Second Half of 2017? Also, Shell began operations at the P-66 FPSO (floating production storage and offloading) unit in the Lula South field, Brazil. For more on Shell’s upstream portfolio, read Is Shell Rejuvenating with Its Robust Upstream Portfolio?

Series outline

In this series, we’ll analyze integrated energy stocks, examining their moving average crossovers and eight-day price forecasts based on their implied volatility. We’ll also look at analyst ratings, expected dividends for the next quarter, institutional ownership changes, and short interest movements. Finally, we’ll compare the stocks’ valuation and their correlation with oil. Continue to the next part to learn about the stocks’ 50-day and 200-day moving averages.


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