Wednesday, 8 March 2017

APA, APC - energy stocks under pressure

With WTIC oil price seeing a very significant net daily decline of around -5% to the low $50s, energy stocks were naturally on the slide. Apache (APA) and Anadarko Petroleum (APC) settled lower by a rather significant -3.6% and -2.7% respectively. Near term outlook is bearish, as the mid term trend has stalled at major resistance.

APA, monthly

APC, monthly


*rather than get lost in the minor day to day noise, I have instead highlighted the giant monthly charts to give some real perspective.

So... WTIC oil had a very rough day as inventory data came in very mixed, and that naturally dragged the related energy stocks lower. Summer driving season is really not that far off, but for now, inventories are close to historic highs, and its increasingly pressuring prices lower.


I am holding to an inflationary scenario, as interest rates look set to climb - which is inherently bullish for equities and (to some extent) commodities.

Clearly, the issue of over-supply remains a problem, and OPEC is still pretty much only able to threaten with words, rather than actual significant supply cuts. Any sustained price action under the $50 threshold would likely see them respond this spring with another threat/announcement, that would (at least temporarily) kick prices back upward.

The wild card?

Any geo-political upset in the middle east.. or (to a lesser extent) across the world, is always going to threaten a spike higher in energy prices. Its somewhat ironic that many of the more unstable countries would especially benefit with higher energy prices.

On balance, I'm still looking for WTIC oil to battle upward to at least the $60 threshold this year. If that is the case, both APA, APC, and most other energy stocks should eventually break above their Dec'2016 highs.