Share Prices Of Oil Producing Companies Still Down

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Share Prices Of Oil Producing Companies Still Down
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Lockdown easing and US data pushes oil prices up, but oil producing companies still down, says EXANTE analyst team

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Q1 2020 hedge fund letters, conferences and more

Quotes Of Oil Producing Companies Are Strengthening

What’s the HYPE about: Oil prices rose to two-month highs last week, reflecting simultaneous recovery of demand and lower supply. Oil producer companies’ quotes are strengthening. In two months BP rose by 33% and Exxon Mobil by 42%.

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Weekly data from the US gave an additional push to the quotes. In particular, levels of crude oil reserves have been falling for the past two weeks, without reaching the 2017 peak levels. This indicates restoration of balance in the oil market and promises further quotations strengthening.

What’s REALLY going on:  It’s true that crude oil reserves are dwindling. However, the collapse of oil prices and the announcements of quarantine softening are prompting increase in refinement levels. This led to increased reserves of gasoline and distillates.

Crude Oil Products Continue To Grow

So, the total amount of crude oil and petroleum products continues to grow. The US strategic oil reserve continues acquisition. India and China haven’t stopped purchasing oil and oil products for the reserves as well.

Buying oil at low prices is not evidence of increased consumption. Oil producers will remain under pressure for a while and continue to limit supply.

Share prices of oil producing companies don’t keep up with general market recovery, remaining at the levels about 40% lower than last year’s peaks. One should note the general downward trend in oil giants’ quotes, which began in 2016-2017. This year’s events only accelerate it.

@exante_global  #oil

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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver

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