Current Oil Trend Worries Investors, CNBC's Pisani Says
NEW YORK (TheStreet) -- The current downward trend of energy stocks has investors concerned, CNBC's Bob Pisani reported on "Squawk on the Street" Tuesday.
"We have a little bit of a problem. The whole game here is oil in a $45 to $50 and then gradually moving up in the second half of the year. That's not happening right now. It's not cooperating with the narrative," Pisani commented.
Crude oil (WTI) is falling by 0.9% to $42.74 and Brent crude is slipping by 0.58% to $44.46 this morning, CNBC reports.
"Remember this whole oil stock narrative that we have been talking about. Q1 was supposed to be the trough in earnings for all the big oil companies. Q2 still have losses but improvement. Q3 further improvement. And Q4 the recovery and in 2017 we sort of have a take off," Pisani explained.
The recent global supply glut has been "pressuring oil" and "playing with this narrative," he continued.
"So the narrative is based on oil moving up over $50, not down to $40, which is the trend here which we've been seeing in the last couple of weeks," Pisani noted.
Despite the downward trend, BP p.l.c. (BP) - Get Report CEO Bob Dudley remains optimistic after the oil company reported weak 2016 second quarter earnings before today's opening bell.
BP reported second quarter underlying replacement cost profit fell 45% year over year to $720 million from $1.3 billion. The British oil company posted a net loss of $1.4 billion.
"His narrative is pretty simple. He expects oil to average $50 to $60 in 2017 and move up. He says the markets are going to tighten. The gasoline glut, which is what we are dealing with now, is going to get mopped up. Unfortunately it is not moving in that director right now. That's got people a little bit concerned," Pisani stated.
Shares of BP are lower by 1.26% to $34.46 this morning.
Separately, TheStreet Ratings rated BP as a "hold" with a score of C.
The company's strengths can be seen in multiple areas, such as its good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, TheStreet Ratings also finds weaknesses including deteriorating net income, poor profit margins and disappointing return on equity.
You can view the full analysis from the report here: BP
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.