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Energy Stocks in Q4: ExxonMobil, Chevron, Shell, and BP


Nov. 12 2019, Published 10:01 a.m. ET

Integrated energy stocks ExxonMobil (XOM), Chevron (CVX), Royal Dutch Shell (RDS.A), and BP (BP) have been rising in the current quarter. Most oil and gas stocks are being boosted by better-than-expected results, higher oil prices, and stronger equity markets. This has also brought about a positive change in their moving averages.

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Energy stocks’ fourth-quarter performances

Earlier in the quarter, energy stocks were weaker due to expected earnings falls in their third-quarter results. Their earnings releases surprised Wall Street, as the falls were lower than anticipated for most energy companies, resulting in recovery.

Chevron, Shell, and BP stocks have risen 1.9%, 2.3%, and 3.1% quarter-to-date. However, ExxonMobil stock hasn’t fully recovered, reflecting a 0.4% fall quarter-to-date.

Nevertheless, energy companies’ earnings have also boosted their stocks so far this month. ExxonMobil and Chevron have risen 4.1% and 4.0%, respectively, month-to-date. Moreover, Shell and BP have surged 3.8% and 3.3%, respectively, in the month.

Oil prices boost energy stocks

Energy stocks are primarily affected by oil price movements because oil prices affect these companies’ upstream realizations and earnings. In the quarter so far, WTI prices have risen 5.3%. This could result in better upstream revenue for these companies in the fourth quarter.

Oil prices have been rising on optimism related to trade talks. Trade tensions have brought on fears of a global economic slowdown, which could affect crude oil demand growth. So, with the easing impact of the trade war on oil demand growth, oil prices are seeing a boost.

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However, the fundamentals of the oil market remain weak. The growth in the oil supply far exceeds the increase in demand, resulting in an estimated supply glut next year. The International Energy Agency also expects oil supply to exceed demand in 2020. To learn more, read Aramco IPO: Will Crude Oil Prices Keep Declining? Such a weak oil scenario has also affected the valuation of the much-awaited IPO of Saudi Aramco.

Equity markets touch record highs

The S&P 500 Index (SPY) has risen about 4.0% in the current quarter led by the expectation of an improvement in the trade conditions between the US and China. Plus, the Fed’s interest rate cut further supported the market.

Besides, in the quarter, Wall Street had anticipated weak earnings from corporates. As earnings surpassed estimates, Wall Street celebrated, with the market touching all-time highs. To learn more, read S&P 500 Index Nears Record High amid Earnings Season.

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Earnings season elevates confidence in energy stocks

ExxonMobil’s, Shell’s, and BP’s earnings fell, but their falls were less pronounced than Wall Street analysts expected. While ExxonMobil’s profits fell 53%, lower than the forecast 54%, Shell’s earnings fell 15%, lower than the estimated 26%. BP’s profits fell 41%, lower than the expected 48%. However, Chevron missed on its reported earnings.

ExxonMobil, Chevron, and BP saw slumps in their segmental earnings in the quarter. Lower oil and gas prices mainly affected their upstream realizations, hitting profits. Weaker upstream earnings impacted their overall earnings. To learn more, read ExxonMobil or Chevron: Which Performed Better in Q3?

However, Shell stole the show by reporting a rise in its integrated gas and downstream earnings. The increase in its segmental earnings came despite harsh business conditions such as lower liquefied natural gas prices and weaker refining margins.

Shell’s earnings rose as the company utilized its operational efficiency by increasing its trading activities in both segments. Plus, a higher marketing margin helped the company’s downstream profits. To learn more, read Has Shell Performed Better than BP in Q3?

Chevron’s moving averages suggest an upcoming crossover

The rise in most energy stocks in the fourth quarter has positively affected its moving averages. Of the four energy stocks, Chevron seems to be close to a positive breakthrough. Chevron’s 50-day moving average has fallen, while its 200-day moving average has risen in the quarter. This has resulted in a narrowing of the gap between both moving averages.

Chevron’s 50-day moving average has come quite close to crossing over its 200-day moving average. CVX’s 50-day moving average stands about 1.6% below its 200-day moving average. Any positive macro news could boost the stock and its 50-day moving average, leading to a crossover. When a short-term moving average crosses over a long-term moving average, it’s considered a technically positive sign, suggesting an acceleration in a stock’s price rise. Investors need to keep a close eye on Chevron stock’s movement.

ExxonMobil’s, Shell’s, and BP’s moving averages

ExxonMobil’s 50-day moving average has fallen more than its 200-day moving average in the fourth quarter. This difference has resulted in a widening of the gap between its moving averages. ExxonMobil’s 50-day moving average, which stood 5.2% below its 200-day moving average on October 1, the beginning of the quarter, now stands 6.2% below its 200-day moving average.

However, Shell and BP stocks have shown the opposite trend. While their 50-day moving averages have risen, their 200-day moving averages have fallen marginally in the quarter, narrowing the gaps between their 50-day and 200-day moving averages. Despite these narrowing gaps, their 50-day moving averages are still quite far from their 200-day moving averages. Shell’s 50-day moving average stands 5.4% below its 200-day moving average, and BP’s 50-day moving average stands 6.3% below its 200-day moving average. Both stocks will need quite a run-up in their stocks and 50-day moving averages for a crossover.

An analysis of the moving average suggests that Chevron stock could soon experience a moving average crossover if oil prices continue to rise and equity markets stay strong.


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