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Oil stocks tumble as short squeeze fades

Scorpio

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#1
Oil stocks tumble as short squeeze fades
By Tomi Kilgore
Published: Mar 8, 2016 1:28 p.m. ET




Oil sector ETF’s components all decline as crude-oil futures pull back


Getty Images
Oil wells pumps in Long Beach, Calif.
Oil stocks traded sharply lower Tuesday, as a pullback in crude-oil prices helped cap a historic run-up in the oil sector that was triggered by investors scrambling to close out bearish bets.

The SPDR Energy Select Sector exchange-traded fund XLE, -3.07% slumped 3.1% in afternoon trade, with all 41 of its equity components trading lower. The oil sector tracker had run up 10% over the past four sessions.


Crude-oil futures CLJ6, -3.09% dropped 3.5%, after running up 5.5% on Monday, and 9.6% last week.

“While market sentiment has improved over the past week, the fundamental oversupply picture for crude has not -- and thus, we believes shorts might merely be waiting on the sidelines until the short squeeze and positive momentum wanes,” analyst Brad Carpenter at Cantor Fitzgerald wrote in a note to clients.

A “short squeeze” refers to a scramble to cover short positions, or bearish bets on a stock.

Among some of the stocks in which shorts were squeezed the most in the past week, EP Energy Corp.’s EPE, -18.35% stock plunged 18%. The stock had rocketed 74% on Monday, the biggest one-day percentage gain in its history, after posting its best-ever weekly performance by more than doubling the week before.

FactSet


EP was downgraded Tuesday to neutral from outperform by Credit Suisse analyst Mark Lear, citing concerns over a “stretched balance sheet,” declining activity and the fact that the stock trades at a premium valuation relative to its peers.

Bonanza Creek Energy Inc. shares BCEI, -25.91% which Lear also downgraded, tumbled 28% Tuesday. The shares soared 42% on Monday, their second best one-day gain ever, after posting their best day ever with a 43% surge on Friday.

It didn’t help matters that Goodrich Petroleum Corp.’s stock GDPM, -29.92% plummeted 40% after the company said Tuesday that it will not make interest payments due March 15 and April 1 on some of its bonds, raising the risk that another oil company would suffer a credit default. Read more about an expected increase in corporate defaults in 2016.

Elsewhere, Rex Energy Corp. REXX, -26.73% dropped 26%, Chesapeake Energy Corp. CHK, -15.29% slid 15%, Denbury Resources Inc. DNR, -31.15% plunged 32%, Whiting Petroleum Corp. WLL, -11.89% shed 11% and Southwestern Energy Co. SWN, -11.53% slumped 7.5%.

Among larger market-capitalization company’s, Exxon Mobil Corp.’s stock XOM, -1.39% fell 1.2% and Chevron Corp. shares CVX, -1.57% lost 1.4%.

http://www.marketwatch.com/story/oil-stocks-tumble-as-short-squeeze-fades-2016-03-08
 

southfork

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#2
I still say governments have been supporting oil prices to prevent a massive default on oil company loans, there was no reason for oil to rise over 30 from 25sh, supply is growing and so Is storage.
 

Scorpio

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#3
yep, with you on that south,

someone is propping this up big time, and whether it is to save the banks and their exposure or??? is the real question
 

nickndfl

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#4
Proxy to prop up the banks and easy to do. Go long with options after hours overnight. It take a financial engineer, but it can be done. Look at PMs.
 

Goldhedge

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#5
If it's as manipulated as we know it is... I suspect someone had to pay a rather large mortgage payment and needed to make some fast cash in the market.


Ok boy's, I'm short oil so let her rip!




LOLZ suckers!