So far, Chevron’s (CVX) stock price has risen 2.1% in November due to stronger equity markets and higher crude oil prices.
Lower short interest in Chevron stock
The short interest in Chevron stock has fallen from 1.13% of the outstanding shares on October 1, the beginning of the current quarter, to 1.10% now. Usually, a fall in the short interest suggests that there are less negative sentiments in stock. However, Chevron’s stock price has remained flat sequentially.
Several factors impacted the sentiments in Chevron stock. While higher oil and equity markets lowered the negative sentiments, lower-than-expected profits raised the negative sentiments. However, Chevron’s upstream volumes are strong despite lower earnings, which kept the negative sentiments in check.
Higher crude oil prices
WTI has risen 6.8% sequentially. The rise is led by optimism about US-China trade talks. Trade talks ease the concerns about how the trade war could impact global economic growth and demand. The expectation of entended production cuts by OPEC and Russia pushed up the prices. Meanwhile, oil fundamentals are still weak. Global oil markets will likely face a supply glut in 2020.
However, the recent slowdown in the trade talks seems to be impacting oil prices. According to a Business Day report, John Kilduff, a partner at Again Capital Management, said, “The US-China situation isn’t looking very positive, so that took some of the steam out of the rally you had this week.”
Strong equity markets
Equity markets have also rallied to record highs in the quarter due to negotiations. The S&P 500 Index (SPX) and the Dow Jones Industrial Average (DJIA) have risen 4.8% and 3.6%, respectively, sequentially. The rise is better compared to the previous quarter. Escalating trade tension between the countries impacted the markets.
Although the discussions have slowed down, the market is optimistic that both sides will resolve the issue. To learn more, read Dow Jones and S&P 500 Ignore Trade War Noise.
Chevron’s weak third-quarter earnings
Chevron’s third-quarter earnings fell 36% YoY—more than Wall Street analysts’ expected fall of 31% YoY. The company’s reported EPS of $1.36 was lower than the estimate of $1.45. Chevron’s earnings fell due to the decline in the upstream and downstream segments’ profits.
Chevron’s upstream earnings have fallen 39% YoY due to lower realizations. The fall has been partially offset by the higher hydrocarbon output. The company’s upstream volumes rose 2.6% YoY during the quarter. Although the rise in volumes was lower than previous quarters, the volumes were still close to record highs witnessed earlier. High hydrocarbon volumes might have prevented a sharp rise in Chevron’s short interest.
Peers’ short interest
While the short interest in Chevron stock has fallen, it has risen for its peers. The short interest in ExxonMobil, Shell, and BP stocks have risen by 0.02, 0.02, and 0.04 percentage points compared to October 1. Currently, the short interest is 0.99%, 0.20%, and 0.14%, respectively.
If we consider the changes in the stock prices, then ExxonMobil’s (XOM) stock price has fallen 1.8% sequentially. Also, Shell (RDS.A) stock has fallen 0.7%. However, BP (BP) stock has risen 1.5% in the current quarter.