Oil Prices Likely to Remain Low Due to Over Supply

By Dale Gillham | Published 27 April 2020

Earnings season has started and so far it has not really offered any big surprises. IBM’s first quarter earnings were lower due to software sales being down to $1.18 billion compared to $1.589 billion in the first quarter of 2019. This is not surprising as IBM has been falling in price since 2013 and during that time most of its earnings reports have not been positive. That said, this could be a turnaround stock, so I recommend you watch this space.  

AMEX revenues were down 75 percent in the first quarter given the current lock down conditions as a result of the corona virus, which has resulted in corporate spending slowing considerably.

As expected, Intel’s earnings were up given that working from home means individuals need products to do so and with Intel providing components, it’s not surprising revenues were up around 23 percent on an annualized basis. That said, second quarter earnings are not expected to be as strong.

Target’s online sales doubled but the news was not all good given that it expects lower profits, as costs increased due to having to adjust to the new Corona virus world. Interestingly, AT&T just missed analyst expectations with earnings around $42 billion instead of the expected $44 billion. They reported advertising sales were down and a loss of premium TV subscribers, and lower wireless equipment sales.

Oil prices are likely to stay low for at least another two months, as the oversupply continues. The futures contracts for West Texas Intermediate Crude oil fell into negative territory down to -$37.63 per barrel for the May contract. That said, the June and July contracts are still in positive territory at this point in time on the belief that supply will slow and, as a result, allow storage space to free up. That said, oil is searching for a low right now, so we may start to see it rise again in the second half of 2020.

An interesting stock to look at is Bill.com, which rose 15.96 percent last week to top the S&P 500 stocks on news that is was recognised on G2’s best products for finance. Bill.com listed in December 2019 and is a leading provider of cloud-based software that simplifies, digitizes, and automates complex back-office financial operations for small and midsize businesses. This is a stock to watch, as is DowDuPont Inc, which was up over 9 percent last week. DowDuPont makes protective gowns and has doubled output due to the corona virus. Consequently, they are expecting earnings to be up. Johnson and Johnson were also up nearly 2 percent while Home Depot and Pfizer were up over 1 percent, which is a good sign, given that the Dow Jones Index fell last week.

For now good luck and good trading.

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