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Depressing Oil

27 July 2016 by lberuti

The reporting season continues and, as there was not much in terms of macro news with the FOMC concluding tonight after the close of the European Market, investors paid some attention. STL ( Statoil ) reported worse than expected Q2 adjusted earnings of $913m, and cut its 2016 capital spending to $12bn from $13bn previously. The company reported an unexpected loss and its CEO said that “the results were strongly affected by weak oil and gas markets”. As there is no sign of oil prices rebounding meaningfully any time soon (higher than expected US inventory reports sent the barrel down more than 2.5% today, below $42), investors were quick to extrapolate what the impact could be on other oil-related companies. STL saw its risk premium jump 8bps to 54bps, and the energy sector was the worst performing today. It was actually the only one wider at the end of the session.