Energy stocks plummeted alongside the broader market today with crude futures lower by almost 5 percent. Certainty regarding the inevitability of a Greek bailout and weakening economic data were the primary driver behind losses. Energy stock components of the S&P 500 declined over 2 percent. Whatever long-term position an investor holds in oil right now, bulls and bears have to agree that in the short term, energy has proven wildly volatile.
Leading the pack lower was Toreador Resources Corps. (TRGL) which took a major hit after French legislators decided to ban hydraulic fracturing, which is used to drill natural gas. Shares of the company instantly plummeted over 20 percent following the report. The likelihood that Toreador will be able to recovery is unlikely considering 99 percent of sales came from France last year.
Simultaneously L & L Energy, Inc. (LLEN) bucked the overarching trend of losses on the market, gaining strength in the aftermath of a report indicating South Korea’s coal imports have shot up 33 percent year-over-year. Many coal bulls wouldn’t be surprised to know this, as for many nations, coal remains the least expensive and thus most widely used source of energy.
The major oil companies like BP PLC (BP), Hess Corp. (HES) and Valero (VLO) all sinking after crude inventories were down 3.4 million barrels last week in trading from the week before. This exceeded analyst expectations of 1.9 million and has the potential to impact these share prices into the near future. Gasoline inventories also rose a rate beneath forecast, about 600,000 on estimates of 1.3 million. Chevron (CVX) and Halliburton (HAL) also experienced losses and high volume on the news.
Analysts are having trouble assessing their positions on energy stocks in recent months as the market proves increasingly volatile and vulnerable to geo-social conflicts and even minute economic news. Pinning down a more permanent direction for energy or recommending a position within the sector has appeared difficult as the reality of long-term demand is overshadowed by short term news That; however, did not stop Bank of America Merrill Lynch analysts from upgrading PetroChina Co. Ltd. (PTR) to a buy. Thomas Wong, the analyst responsible for the upgrade, pointed to the independence of Southern Sudan, expected on July 9 as a prompt for PetroChina’s parent, China National Petroleum Corp., to shift as many as 3.4 billion barrels of its oil reserves there into PetroChina.The addition would account for around a 30 percent reserve increase for the company which would naturally help to boost revenues. In spite of this shares of PetroChina fell.
Just last week, Exxon Mobil’s (XOM) massive oil find, of 700 million barells, in the Gulf of Mexico prompted a short-lived spike in share prices. Regardless of the profit potential of the discovery, prices quickly reversedon negative economic news and a sluggish overall market. only to see the gains reversed shortly after on negative economic news and a sluggish overall market.