SPY390.62+10.26 2.70%
DIA316.70+7.25 2.34%
IXIC13,578.95+386.61 2.93%

DJ Energy & Utilities Roundup: Market Talk

· 02/04/2021 16:50

The latest Market Talks covering Energy and Utilities. Published exclusively on Dow Jones Newswires at 4:20 ET, 12:20 ET and 16:50 ET.

1440 ET - US benchmark oil prices end a choppy session 1% higher at a fresh, 1-year-high of $56.23 a barrel amid tightening global supplies and expectations for a strong recovery in demand by the spring. WTI crude's increase marks four straight sessions of gains and sets it on course for one of its biggest weekly gains in months. Bob Yawger at Mizuho says declining US oil inventories, including a big drop in stockpiles at the US storage hub in Cushing, Okla., are providing fundamental support for price. He says further lift is coming from hopes for an economy-boosting US stimulus package, and rising overall risk appetite as US stock markets rise. (dan.molinski@wsj.com)

1256 ET - The many SPACs coming to the market to hunt for clean-energy companies can help private-equity firms exit investments in the sector, says Mark McCall, a managing director at Lime Rock New Energy. The private-equity manager, which so far has raised more than $100M for its first clean-energy fund, backs companies such as Qmerit, an installer of electric vehicle-charging stations for car makers, fleet operators and property owners. "We're targeting smaller companies but also rapidly growing companies," McCall says. "Public-market investors are looking for growth. So, we may invest in companies that ultimately become targets for SPACs." (luis.garcia@wsj.com; @lhvgarcia)

1225 ET - European stocks close mostly higher on optimism about a US economic-stimulus package and a vaccination-driven economic recovery. The Stoxx Europe 600 gains 0.6% and the DAX and CAC-40 rise 0.9% and 0.8% respectively. Still, the FTSE 100 edges 0.06% lower as sterling rises after traders interpreted Bank of England comments as implying U.K. interest rates are unlikely to turn negative in the short term. The price of a barrel of Brent crude increases 0.2% to $58.60. The Dow Jones advances 0.8%. "Continental equity benchmarks are higher as optimism that the Biden administration will sign off on a stimulus package has helped the mood," says David Madden at CMC Markets. (philip.waller@wsj.com)

1042 ET - US benchmark oil prices erase overnight gains to fall 0.5% to $55.40 a barrel as investors worry a 17% rally in prices over the past 30 days amid tightening supplies will lead major producers to start raising production. Prices closed Wednesday at their highest in more than a year after the EIA reported US crude-oil inventories fell to an 11-month-low 476M barrels. But those declines could reverse if US crude production, which has stayed relatively low near 11M barrels a day for 12 straight weeks, begins to climb. And a 10-week streak of increases in the Baker Hughes US oil rig-count might suggest production increases are coming. (dan.molinski@wsj.com)

1005 ET - Texas's largest city of Houston may be known for oil and gas, but analysts at Simmons say it's quickly adjusting to the energy transition from oil to renewables. "There is a misperception that Houston will be a loser in the energy transition," they say. "This viewpoint misses how quickly things are changing in the city." As one example, the analysts note a decision by Greentown Labs, which bills itself as North America's largest climatetech startup incubator, to move to Houston's new Innovation District, which also houses other green-energy firms. Greentown has announced that five new partners, CenterPoint Energy, Gexa Energy, EIV Capital, Wells Fargo, and Williams, have joined its roster of partners. (dan.molinski@wsj.com)

0712 ET - Royal Dutch Shell's dividend increase is positive despite a pandemic-driven fourth-quarter loss, A.J. Bell says. Shell pledged to raise its first-quarter dividend by 4%, forecasting a demand recovery later this year. While the Anglo-Dutch oil major's net loss reflected the impact on oil demand and prices from global lockdowns and recession, underlying results weren't as bad and Shell generated enough cash flow to cover its proposed dividend payment twice over, A.J. Bell says. "Throw in the fact that oil and gas prices moved higher through 2020, and have advanced again in early 2021, and this may have underpinned the decision to sanction the $0.1665 dividend for 4Q and target that increase to $0.1735 in 1Q 2021," says A.J. Bell's Russ Mould. (philip.waller@wsj.com)

0451 ET - Enel's 2020 preliminary results are expected to be in line with consensus, according to Equita Sim's estimates. Ordinary Ebitda is estimated at EUR17.9 billion versus guidance of EUR18 billion, while debt is seen at EUR48.7 billion compared to guidance of between EUR48 billion and EUR49 billion, the investment bank says. "We don't expect major surprises vs. the strategy plan indication of November 2020," Equita Sim says. The energy company's results are scheduled to be released later on Thursday. (giulia.petroni@wsj.com)

0436 ET - Shell shares inch down 0.1% to GBP13.35 after the company's swing to a $4 billion loss in 4Q. "Whichever way you look at it these numbers are disappointing, lower production volumes, reduced cash flow and a rise in net debt," says CMC Markets' Michael Hewson. Despite its falling earnings, Shell raised its dividend after making its first cut to its payout since World War Two last year. But "those clamoring for higher returns to shareholders should understand at what cost this might come," says Citi's Alastair Syme. With heavy debt and impairment loads, "this equity is actually very similarly priced to other integrated oil companies, with a slightly more difficult balance sheet and...a very different level of 'backlog' visibility," Syme adds. (david.hodari@wsj.com ; @davidhodari)

0336 ET - The FTSE 100 climbs 0.5% to 6541 points, as a weaker sterling lifts overseas earners and as traders sift through corporate earnings ahead of the Bank of England's policy decision at 1200 GMT Thursday. Compass Group shares rise 3.3% after the catering contractor posted improved first quarter results. Barratt Developments advances 3.8% after the housebuilder reported a rise in first-half profit. BT Group gains 2.1% after the telecoms group's third-quarter earnings beat market forecasts. Royal Dutch Shell edges up 0.3% after the energy group swung to net loss in the final quarter of 2020 but said it expects to raise its dividend in the 2021 first quarter. Unilever shares drop 3.6% after the consumer goods giant's 2020 net profit unexpectedly fell. (renae.dyer@wsj.com)

0332 ET - Royal Dutch Shell's need for more cost-cutting and potential further disposals to balance the books is underlined by net debt rising to $75 billion from $73.5 billion in the fourth quarter despite the company targeting a reduction to $65 billion, Interactive Investor's Richard Hunter says. However, the analyst says Shell is attempting to batten down the hatches on the factors within its control, noting that the 25% reduction in capital expenditure and the 12% cut to operational costs are significant achievements. Shares rise 0.6% to 1,344 pence. (jaime.llinares@wsj.com)

0325 ET - Shell achieved adjusted earnings on a CCS basis of $393 million for the fourth quarter of the year, missing the market consensus estimate by 34%, Jefferies says. This was mainly caused by the oil products business, as earnings were 44% below estimates due to a weaker trading performance, the U.S. bank notes. Shares in the Anglo Dutch oil major edge up 0.3% in early trading. (jaime.llinares@wsj.com)

1741 ET - Australia should set more ambitious renewable energy targets to spark a new wave of investments in power generation, Wood Mackenzie reckons. The consultancy, which estimates there's $40B worth of potential projects in the Australian power sector, says there needs to be a coordinated push, however, to make sure the grid can keep up with growth. "The grid has been pushed to its limit," Wood Mackenzie says. "Australia is at a pivotal juncture today," it adds, "and investment decisions in the next few years will play a key role in shaping the role of dispatchable generation which will be the need of the hour as coal retirement snowballs." (rhiannon.hoyle@wsj.com; @RhiannonHoyle)

(END) Dow Jones Newswires

February 04, 2021 16:50 ET (21:50 GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.