Resolute Energy Corp (NYSE:REN) | Chesapeake Energy Corporation (NYSE:CHK) | Stone Energy Corp (NYSE:SGY)
Energy companies like Resolute Energy, Chesapeake Energy, and Stone Energy are all feeling the pain today, and for good reason. Early this morning, two stories broke that could lead to further supply and demand issues. Today, we'll talk about these stories, how the stocks reacted, and what we can expect to see from REN, CHK, and SGY ahead. So, let's get right to it...
US Oil Supply Data Causes Concerns For REN, CHK, And SGY
As mentioned above, there are two stories that are weighing heavy on Resolute Energy, Chesapeake Energy, and Stone Energy today. One of the biggest of these stories is US oil supply data. At the end of the day, all of these companies are in the energy sector. As a result, they are highly dependent on oil prices. When the value of oil heads downward, the companies feel the pain of smaller revenues and weak profits. On the other hand, when oil is heading up in value, these companies flourish under conditions that lead to strong revenue and profits.
With all of that said, US supply data was released early this morning, leading to tremendous resistance on the price of oil. Naturally, this led to declines in REN, CHK, and SGY. According to the early morning release from the US Energy Information Administration, crude oil inventories in the country climbed in the past week. In the week ending August 26th, crude oil inventories were up by 2.3 million barrels. As a result, there are currently 525.9 million barrels in the inventory at the moment. This increase was far larger than the 900,000 barrel increase analyst expected. So, the data is raising big questions with regard to the balance of supply and demand.
Federal Reserve Could Add To The Pressure
Another big story that REN, CHK, and SGY investors should be tracking closely is the United States Federal Reserve. The central bank has been planning on increasing the Federal Funds rate for some time now. However, poor jobs growth, concerns in the housing industry, and weak consumer spending led to delays in this plan. However, recent economic data has been overwhelmingly positive. For example, early this morning, the ADP National Employment report was released.
In the ADP report, we learned that 177,000 jobs were added by private employers in the month of August. During the month, analysts expected that we would see growth in the amount of 175,000 on average, with estimates ranging from 135,000 to 225,000. This was another major hit to Resolute Energy, Chesapeake Energy, and Stone Energy. After all, the data makes the case for increased rates stronger. Because oil is priced using the USD and interest rates largely dictate USD value movements, this could cause oil to become more expensive in nations around the world, leading to declining demand due to accessibility issues.
What We're Seeing In The Market Today
We all know that the news moves the market. With the two stories having a negative impact on oil, we're naturally seeing declines in REN, CHK, and SGY today. Currently (12:48), the stocks are trading at $16.56, $6.28, and $10.66 per share after a loss of $0.58 (3.38%), $0.23 (3.53%), and $0.32 (2.91%), respectively.
What We Can Expect To See Moving Forward
Moving forward, I have a relatively bearish opinion of what we can expect to see from the energy sector as a whole. Because REN, CHK, and SGY are all part of this sector, I'm expecting these stocks to see incredible headwinds ahead. At the end of the day, the argument for higher rates continues to build, and that's bad news for commodities. This, on top of continued global economic concerns and increasing supply, will likely lead to further declines in the price of oil, and, therefore, Resolute Energy, Chesapeake Energy, and Stone Energy.