David Feldman

Three Things to Know in Energy - 2/27/2017

Blog Post created by David Feldman Champion on Feb 27, 2017

Mattis clarifies, “We’re not in Iraq to seize anybody's oil”


In talks with Iraqi leaders last week, Defense Secretary Jim Mattis reassured questioning Iraqi leaders that the US will not be attempting to seize their oil without payment.  Back in January, Trump was quoted as saying to the CIA, “We should have kept the oil. But okay. Maybe you'll have another chance."  Mattis seems to have publicly backed off from Trump’s position with his comments during these meetings.  He stated, "All of us in America have generally paid for our gas and oil all along and I'm sure that we will continue to do so in the future."


US shale oil output seems to be recovering faster than expected.


Societe Generale oil analyst Michael Wittner is one of many that believe US shale is on the rise.  He stated, “Rig counts are increasing at an accelerating pace, and given the technological advances of the past three years, this should translate into significant supply.  US shale is coming back, and it’s coming back strong.”


OPEC is also admitting that US shale is quickly becoming a viable threat to the cartel.  In its February report, they referred to the traction US shale is gaining.  They stated that their non-OPE supply forecasts were “made mainly based on US onshore drilling activities and more announced spending by operators on production for this year.”


Energy sector down as oil prices remain steady.


The S&P 500 Energy sector is currently down roughly 7% year-to-date.  This isn’t particularly alarming when you look at this data point alone.  However when compared to the broad S&P 500, which is currently up 5.5% year-to-date, this becomes more interesting.   Normally, the Energy sector tracks to the price of oil fairly closely, but recently they have diverged.  Oil prices continue to hold up as the overall Energy sector continues its downward trend. 


If we continue to see this downward trend, Market experts believe this means Energy stocks are set for further declines, or oil is set for a dramatic rally.   The next month or so should give us a better idea.