Six weeks ago, we took a deep dive into the absolute and relative performance of the S&P 500's energy sector. At that point, we concluded that, "[w]ith this year's breakdown from the 2016's "bearish flag" pattern, the long-term underperformance of energy stocks could carry over through 2017 and beyond." Updating the relative performance chart from that early May piece suggests that, if anything, the outlook for energy stocks has worsened with the latest drop in oil prices.
July crude oil futures go away today and it will be up to the August crude futures to find a bottom. As U.S. oil production is showing signs of faltering (up only 12,000 barrels in June as opposed to an expectation of 120,000 barrels) and seeing we are past the pain of many shale producers, U.S. rig counts will slow in coming weeks and we may see the count start to fall. Maybe that is why Saudi Arabia is not so worried about the uptick in oil production from Nigeria and Libya.