Market Overview

Oil Market Not Improving As Quickly As Expected, Analyst Cuts Price Outlook

Share:
Oil Market Not Improving As Quickly As Expected, Analyst Cuts Price Outlook
Related STO
The Market In 5 Minutes: Infrastructure, Amazon, Walgreens-AmerisourceBergen
Lemelson Capital Demands Geospace Replace Leadership, Explore Company Sale
Related BP
Earnings Scheduled For July 31, 2018
RBC Capital Markets: Kosmos Energy Has 25% Upside Ahead
BP Plc - A Look At The Second-Quarter Earnings Results (Seeking Alpha)

Societe Generale has become the latest firm to throw in the towel on a 2017 oil market recovery. On Wednesday, the firm lowered its crude oil price targets and income outlook for the oil companies it covers.

Analyst Irene Himona cut her 2017 price forecast for Brent crude oil from $55/bbl to $50/bbl. In addition, she cut her 2018/2019 price forecasts from $60/$65 to $50/$52.

“Global oil markets have not rebalanced as quickly as expected and inventories remain at record levels; growth in US domestic oil supply may be calming down in the face of some capacity constraints, but growth to date has been nearly twice original expectations,” Himona wrote.

Related Link: Todd Gordon's Oil ETF Trade

She also reduced sector-wide income estimates by 18.4 percent in 2017, 29 percent in 2018 and 30.6 percent in 2019.

For investors, oil-price-leveraged stocks such as Statoil ASA(ADR) (NYSE: STO), BP plc (ADR) (NYSE: BP) and Eni SpA (ADR) (NYSE: E) received the biggest earnings estimate cuts.

In light of the new forecast and earnings outlook, Societe Generale has downgraded BP from Buy to Hold.

Still, Himona sees pockets of opportunities for selective investors in an extended $50/bbl oil environment. Companies with more exposure to downstream operations, such as chemicals and refining, could get a margin boost from lower oil prices. In addition, even if oil prices will not be a catalyst for another several years, spending cuts could drive earnings upside in the near-term.

Societe General maintains a Buy rating on top pick Total SA (ADR) (NYSE: TOT), as well as Royal Dutch Shell plc (ADR) (NYSE: RDS-A) (NYSE: RDS-B) and Eni.

Latest Ratings for STO

DateFirmActionFromTo
Mar 2018UBSDowngradesBuyNeutral
Feb 2018Morgan StanleyUpgradesUnderweightEqual-Weight
Nov 2017BMO CapitalDowngradesOutperformMarket Perform

View More Analyst Ratings for STO
View the Latest Analyst Ratings

Posted-In: Irene HimonaAnalyst Color Downgrades Price Target Commodities Top Stories Markets Analyst Ratings Best of Benzinga

 

Related Articles (BP + E)

View Comments and Join the Discussion!

Fintech Startups On Track To Set Annual Financing Record

3 'Left For Dead' Stocks That Have A Lot Of Life Left, According To Jim Cramer