What to Anticipate From Big Oil This Earnings Season
As the spotlight shifts to tech earnings next week, the eyes of savvy investors remain fixed on a trio of oil giants—Shell PLC (SHEL), Exxon Mobil (XOM), and Chevron (CVX)—set to reveal their financial prowess. Buckle up; this is no ordinary earnings season—it's an opportunity to ride the waves of market moves strategically.
In the realm of expectations, Wall Street analysts forecast substantial drops in year-over-year profits for these energy behemoths. SHEL is expected to report EPS of $1.94, down from $2.76 in the same quarter last year. XOM is pegged at $2.22, a decrease from $3.40, and CVX is anticipated to show $3.31, a dip from $4.09 in Q4 2023.
However, the narrative goes beyond these numbers. Rather than dwelling on perceived weak oil prices in the last quarter, let's consider the bigger picture. Despite sporadic drops below $70, crude prices hovered above $85 for the majority of September 2023. The average for the quarter might not be as dismal as it seems.
The Plot Thickens: The Power of Management Commentary
But here's where the real story unfolds. The market's reaction won't be solely dictated by the Q4 figures; instead, all eyes will be on the management teams' forward-looking statements. Recent positive developments suggest a silver lining.
In China, the central bank's unexpected cut in required reserve ratios for banks signals a commitment to support the economy, offering a potential boost to oil demand. The ripple effect reaches the US, where an impressive 3.3% GDP growth in Q4 2023, coupled with a controlled inflation rate, paints a picture of a thriving economy.
Decoding the Signals: What It Means for Traders
With demand indicators flashing green in the world's top oil markets, the spotlight shifts to the big players' supply-side strategies. The Red Sea tensions and OPEC+ cuts have attempted to balance the scales, but the oil glut narrative may need reconsideration.
As SHEL, XOM, and CVX take the earnings stage, their commentary on the supply-demand dynamics will weigh heavily on market sentiment. Traditionally reserved in their guidance, the oil giants might strike a cautiously optimistic tone given the changing demand landscape.
It's crucial to note that my positions in SHEL and CVX are strategic—a long-term hold for SHEL and a calculated trading position for CVX. While the oil market's long-term trajectory remains uncertain, the current scenario presents short-term trading opportunities that shouldn't be overlooked.
Charting the Course: Trading Amidst Uncertainty
Trading around earnings always carries risks, but with positive signals aligning for Q4 earnings and forward guidance, I'm entering the releases long on all three fronts. I've leveraged some cash from last week's TSLA trade, setting the stage for potential gains.
Whether you're mirroring this trade or forging your path, consider the broader economic landscape. Big oil's outlook hinges not just on the past but on their vision for the future. The stage is set, and as the curtains rise on earnings, the oil market drama unfolds. Don't just be a spectator—position yourself to seize the opportunities.
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