Crude oil is under fresh pressure on Wednesday as the rally from early May lows has reversed 50%. West Texas Intermediate moved below the $47-a-barrel level after JBC Energy reported falling Organization of the Petroleum Exporting Countries production cap compliance (down to 92% from 96% in April). It’s clear the oil Sheiks — despite agreeing to a nine-month extension of their output freeze deal — are increasingly desperate as U.S. shale producers lower their cost structures and boost rig counts.
Commerzbank analyst Carsten Fritsch wrote in a note to clients that “[t]here continues to be considerable skepticism about the effectiveness of the production cuts” amid an ongoing global oversupply situation and swollen inventories.
This is terrible news for energy stocks, which have been in a persistent six-month downtrend. The Energy Select Sector SPDR (ETF) (NYSEARCA:XLE) is already down nearly 16% from its December high. Today’s losses push the sector down to levels not seen since last July.
As a result, here are seven energy stocks that are bound to suffer greater losses.
Troubled Energy Stocks: Exxon Mobil (XOM)
Exxon Mobil Corporation (NYSE:XOM) shares have declined below their 20-day, 50-day and 200-day moving averages and they have also dropped out of their lower Bollinger Band. From a technical perspective, XOM stock is a train wreck.
Critical support near $80 is a must-hold for Exxon (as it did in September, March, and again in April). Otherwise, the bulls face a decline back to early 2016 lows when energy stocks were first recovering from crude oil falling all the way down to $26.05 a barrel.
The company will next report results on July 28 with analysts looking for earnings of 94 cents per share of XOM stock on revenues of $65.7 billion. The company suffered a downgrade from Moody’s on May 24, lowering its outlook to negative from stable based on weak credit measures.
Troubled Energy Stocks: Chevron (CVX)
Chevron Corporation (NYSE:CVX) shares are also below their 20-day, 50-day and 200-day moving averages and they have dropped below their lower Bollinger Band. Watch for a break of critical resistance at $103, which would set up a decline in CVX that reaches all the way back to October lows, near $98. That would be worth a 5%+ loss from here.
Chevron will next report results on July 28. Analysts are looking for earnings of $1.02 per share of CVX stock on revenues of $32.8 billion. The company reported disappointing results back on April 28, with revenues of $33.4 billion missing estimates of $34.05 billion.
Troubled Energy Stocks: Halliburton (HAL)
Halliburton Company (NYSE:HAL) shares are testing their early May low near $44 and they are also below their 20-day, 50-day and 200-day moving averages. HAL shares have lost more than 24% from their late January high, and are on track for an additional 10% decline, falling to their late September low near $40. Should that level not hold, the bulls would be looking at a decline all the way back to the early 2016 range near $34 — a 25% drop.
Halliburton will next report results on July 24 with analysts looking for earnings of 16 cents per share on revenues of $4.8 billion. The company reported solid results on April 24, but HAL stock drifted lower as management warned of international pricing pressure.
Troubled Energy Stocks: Schlumberger (SLB)
Schlumberger Limited. (NYSE:SLB) shares have stair-stepped down from a high near $87 back in January to test a low of $68 this morning — a decline of roughly 22%. SLB stock is in free fall now, with no significant support until you get to the early 2016 trading range near $62. A decline to that level would be worth a further 11% decline from here.
Schlumberger will next report results on July 21 before the bell. Analysts are looking for earnings of 30 cents per share on revenues of $7.3 billion. SLB reported mixed results on April 21, with earnings matching estimates, but revenues soft at $6.89 billion compared to the $6.98 billion expected. This was due to a decline in international drilling activity.
Troubled Energy Stocks: ConocoPhillips (COP)
ConocoPhillips (NYSE:COP) shares have dropped back below their 200-day moving average, falling out of a two-month consolidation pattern last week and testing its late March lows. A violation here would set up a decline all the way back to the late September low, near $38, which would be worth a 15% decline for COP stock.
ConocoPhillips will next report results on July 27 before the bell, with analysts looking for earnings of 5 cents per share on revenues of $7 billion. On May 4, COP was forced to restate its previous quarterly numbers regarding the Shenandoah well in the Gulf of Mexico, as it exited the deepwater drilling business. The quarterly loss per share deepened to 14 cents from 2 cents, previously.
Troubled Energy Stocks: Occidental Petroleum Corporation (OXY)
Occidental Petroleum Corporation (NYSE:OXY) has dropped out of its multi-week consolidation range by violating support at the $60-a-share level. OXY shares are already down some 22% from their mid-2016 high. A drop below the early-May low of $58 would set up a decline all the way back to the January 2016 low of $55.23 — a decline of more than 7%.
Occidental Petroleum will next report results on Aug. 3 before the bell. Analysts are looking for earnings of 25 cents per share of OXY on revenues of $3.2 billion. The company reported better-than-expected results on May 4 with earnings of 15 cents per share beating estimates by 7 cents; revenues jumped 30.6% to $2.98 billion. But now that the early 2016 energy price weakness has been lapped, forward earnings growth should stall for this energy stock.
Troubled Energy Stocks: Valero Energy (VLO)
Valero Energy Corporation (NYSE:VLO) shares have dropped below their 200-day moving average for the first time since last October — violating a six-month consolidation pattern centered on $66. This is after VLO bonked on three-year-long overhead resistance near the $70-a-share level. Watch for a return to the September/October lows near $50, which would be an 18% decline from here.
Valero Energy will next report results on July 25 before the bell. Analysts are looking for earnings of $1.48 per share of VLO on revenues of $22.1 billion. The company reported better-than-expected results on April 25, with earnings of 68 cents per share beating estimates by 8 cents; shares suffered a downgrade from analysts at Morgan Stanley on Tuesday.
Anthony Mirhaydari is founder of the gain (ETFs) and Edge Pro (Options) investment advisory newsletters. A two-week and four-week free trial offer has been extended to Investorplace readers. Redeem by clicking the links above.