Bank of America Ups Airlines

BofA/Merrill raises Airline estimates, Delta and Southwest best positioned

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BofA/Merrill analyst Andrew Didora raised Airline estimates and price target to reflect lower fuel pricing and remains positive on the industry said to remain selective into second-half 2017.

The analyst believes Buy rated Delta Air Lines (DAL) and Southwest (LUV) are best positioned for sequential unit revenue improvement in the second half due to decelerating and easing comps and raised their price targets to $71 and $75 from $64 and $62, respectively.

The analyst expects capacity to increase modestly in 2018 to +3.4% from +2.8% in 2017 and expects Delta to accelerate capacity growth to +1.9% and Southwest to +5%.

As part of the sector note, Didora raised Buy rated United Continental’s (UAL) price target to $105 from $85, Alaska Air’s (ALK) to $120 from $115, Spirit Airlines’ (SAVE) down to $68 from $75, and raised Underperform rated American Airlines’ (AAL) to $42 from $40 and lowered Hawaiian Holdings’ (AAL) to $43 from $47.

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Qatar Airways to Buy 10% of American Airlines

Qatar Airways intends to make ‘significant’ investment in American Airlines

In a regulatory filing, American Airlines Group recently received an unsolicited notice from Qatar Airways indicating Qatar Airways’ intention to make a significant investment in American Airlines.

As a publicly traded company, American Airlines’ common stock is available for purchase on the Nasdaq Stock Market, and Qatar Airways has indicated that its purchase would be made on the open market.

Consistent with the notice, Qatar Airways has also submitted a filing under the Hart-Scott-Rodino Act with respect to its potential investment in American Airlines common stock.

A filing under the HSR Act is required for an acquisition by Qatar Airways of more than approximately $81M of American Airlines common stock, and is subject to review by the Antitrust Division of the United States Department of Justice in accordance with the HSR Act.

The notice advised that Qatar Airways intends to purchase at least $808M and, in a conversation between the CEOs of the two companies initiated by the Qatar Airways CEO, Qatar Airways indicated that it has an interest in acquiring approximately a ten percent stake.

American Airlines will respond in due course with the appropriate filings required under the HSR Act.

The company’s Certificate of Incorporation prohibits anyone from acquiring 4.75% or more of the company’s outstanding stock without advance approval from the Board following a written request in accordance with the procedures set forth therein. The Board has not received any such request.

The company also notes that there are foreign ownership laws that limit the total percentage of foreign voting interest to 24.9%.

The proposed investment by Qatar Airways was not solicited by American Airlines and would in no way change the Company’s Board composition, governance, management or strategic direction. It also does not alter American Airlines’ conviction on the need to enforce the Open Skies agreements with the United Arab Emirates and the nation of Qatar and ensure fair competition with Gulf carriers, including Qatar Airways.

American Airlines (AAL) continues to believe that the President and his administration will stand up to foreign governments to end massive carrier subsidies that threaten the U.S. aviation industry and that threaten American jobs.

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Oil Stocks Downgraded

Oil entered the first bear market since August as concerns worsen over a global supply glut

The number of downgrades may, from a contrarian point, signal oil’s bottom

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A number of oil related stocks are down this morning after brokers downgraded several oil related stocks. Oil entered the first bear market since August as concerns worsen that OPEC is failing to ease a global supply glut.

Adding to an oversupplied market are Libya, which is pumping the most in four years, and shale drillers that are staging the longest drilling ramp-up on record. Meanwhile traders are hoarding an increasing amount of oil in tankers. All that crude is hindering efforts by the Organization of Petroleum Exporting Countries and its allies to reduce stockpiles to the five-year average.

The American Petroleum Institute (API) reported a draw of 2.72 million barrels in United States crude oil inventories, compared to analyst expectations that the EIA would report a 2.0-million barrel draw for the week ending June 16. This week’s inventory draw almost completely offsets last week’s API-reported crude inventory build of 2.75 million barrels.

Gasoline inventories rose this week by 346,000 barrels, as refiners continue to take crude oil out of inventory and turn it into gasoline. Surveyed analysts were close on gasoline predictions this week, expecting a 400,000-barrel build for the fuel, but even though the API report was close to projections, the three-week rise in inventories mean that demand for the fuel is not sufficient to cut into inventories as one would expect this time of year.

The Energy Department reports its inventory data at 10:30 a.m. today.  Based on the number of downgrades, it may be a bottom for oil prices!

Crude oil last traded at $43.70 per barrel.

Here is a list of oil stocks downgraded today:

Downgrades

AON Aon plc to Neutral from Buy at Janney Capital
APA Apache to Sell from Neutral at Seaport Global
AREX Approach Resources to Sell from Neutral at Seaport Global
AXAS Abraxas Petroleum to Neutral from Buy at Seaport Global
AXTA Axalta Coating to Underperform from Buy at BofA/Merrill
BAS Basic Energy to Neutral from Buy at Seaport Global
BBG Bill Barrett to Sell from Neutral at Seaport Global
BHI Baker Hughes to Neutral from Buy at Seaport Global
BP BP to Underperform from Neutral at Macquarie
CHK Chesapeake to Underperform from Neutral at Macquarie
CIR CIRCOR to Sell from Neutral at Seaport Global
CLR Continental Resources to Sell from Buy at Seaport Global
CPE Callon Petroleum to Neutral from Buy at Seaport Global
CRZO Carrizo Oil & Gas to Sell from Buy at Seaport Global
CRZO Carrizo Oil & Gas to Sell from Buy at Seaport Global
CVE Cenovus Energy to Underperform from Neutral at Macquarie
CVX Chevron to Neutral from Outperform at Macquarie
CXO Concho Resources to Neutral from Buy at Seaport Global
DO Diamond Offshore to Sell from Neutral at Seaport Global
DOV Dover to Neutral from Buy at Seaport Global
DVN Devon Energy Neutral at Seaport Global
E Eni SpA to Neutral from Outperform at Macquarie
ECA Encana to Neutral from Outperform at Macquarie
ECR Eclipse Resources to Neutral from Buy at Seaport Global
EGN Energen to Sell from Neutral at Seaport Global
ESES Eco-Stim Energy to Neutral from Buy at Seaport Global
ESTE Earthstone Energy to Neutral from Buy at Seaport Global
ESV Ensco to Sell from Neutral at Seaport Global
FI Frank’s International to Underweight from Equal Weight at Morgan Stanley
FI Frank’s International to Sell from Neutral at Seaport Global
GST Gastar Exploration to Neutral from Buy at Seaport Global
HAL Halliburton to Neutral from Buy at Seaport Global
HK Halcon Resources to Neutral from Buy at Seaport Global
HP Helmerich & Payne to Sell from Neutral at Seaport Global
HP Helmerich & Payne to Underweight from Equal Weight at Morgan Stanley
ICD Independence Contract Drilling to Equal Weight at Morgan Stanley
JONE Jones Energy to Neutral from Buy at Seaport Global
KEG Key Energy to Neutral from Buy at Seaport Global
LONE Lonestar Resources to Neutral from Buy at Seaport Global
LPI Laredo Petroleum to Neutral from Buy at Seaport Global
MRC MRC Global to Neutral from Buy at Seaport Global
MRO Marathon Oil to Sell from Neutral at Seaport Global
NBL Noble Energy to Sell from Neutral at Seaport Global
NBR Nabors Industries to Equal Weight from Overweight at Morgan Stanley
NBR Nabors Industries to Neutral from Buy at Seaport Global
NE Noble Corp. to Neutral from Buy at Seaport Global
NFX Newfield Exploration to Sell from Buy at Seaport Global
OAS Oasis Petroleum to Neutral from Buy at Seaport Global
OII Oceaneering to Sell from Neutral at Seaport Global
OII Oceaneering to Underweight from Equal Weight at Morgan Stanley
OIS Oil States to Equal Weight from Overweight at Morgan Stanley
PDCE PDC Energy to Neutral from Buy at Seaport Global
PDS Precision Drilling to Equal Weight from Overweight at Morgan Stanley
PES Pioneer Energy to Neutral from Buy at Seaport Global
PQ PetroQuest to Neutral from Buy at Seaport Global
PTEN Patterson-UTI to Neutral from Buy at Seaport Global
RDC Rowan Companies to Sell from Neutral at Seaport Global
RDS.A Royal Dutch Shell to Neutral from Outperform at Macquarie
REPYY Repsol to Neutral from Outperform at Macquarie
RES RPC, Inc. to Neutral from Buy at Seaport Global
RICE Rice Energy to Neutral from Buy at Seaport Global
SD SandRidge Energy to Neutral from Buy at Seaport Global
SM SM Energy to Neutral from Buy at Seaport Global
SN Sanchez Energy to Sell from Buy at Seaport Global
SNDE Sundance Energy to Neutral from Buy at Seaport Global
SPN Superior Energy to Neutral from Buy at Seaport Global
SRCI SRC Energy to Neutral from Buy at Seaport Global
WFT Weatherford to Neutral from Buy at Seaport Global
WLL Whiting Petroleum to Sell from Neutral at Seaport Global
WLL Whiting Petroleum to Neutral from Outperform at Macquarie
WPX WPX Energy to Sell from Buy at Seaport Global
XEC Cimarex Energy to Sell from Neutral at Seaport Global

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Boeing Raises Forecast for Aircraft Demand

Boeing projects need for 41,030 new aircraft over 20 years, valued at $6.2T

The single-aisle segment will see the most growth over the forecast

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Boeing  (BA) has raised its forecast for new airplane demand, projecting the need for 41,030 new airplanes over the next 20 years valued at $6.1T.

The company’s annual Current Market Outlook, or CMO, was released today at the Paris Air Show, with total airplane demand rising 3.6 percent over last year’s forecast.

“Passenger traffic has been very strong so far this year, and we expect to see it grow 4.7 percent each year over the next two decades,” said Randy Tinseth, vice president of Marketing, Boeing Commercial Airplanes.

“The market is especially hungry for single-aisle airplanes as more people start traveling by air.”

The single-aisle segment will see the most growth over the forecast, fueled by low-cost carriers and emerging markets. 29,530 new airplanes will be needed in this segment, an increase of almost 5 percent over last year.

The forecast for the widebody segment includes 9,130 airplanes, with a large wave of potential replacement demand beginning early in the next decade.

With more airlines shifting to small and medium/large widebody airplanes like the 787 and 777X, the primary demand for very large airplanes going forward will be in the cargo market.

Boeing projects the need for 920 new production widebody freighters over the forecast period.

The Asia market, including China, will continue to lead the way in total airplane deliveries over the next two decades. Worldwide, 57 percent of the new deliveries will be for airline growth, while 43 percent will be for replacement of older airplanes with new, more fuel efficient jets.

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Rig Counts Continue to Rise!

As long as rig counts continue to rise, crude will stay under pressure

Baker Hughes reports U.S. rig count up 6 to 933 rigs

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Baker Hughes  (BHI) reports that the U.S. rig count is up 6 rigs from last week to 933, with oil rigs up 6 to 747, gas rigs up 1 to 186, and miscellaneous rigs down 1 to 0.

The U.S. Rig Count is up 509 rigs from last year’s count of 424, with oil rigs up 410, gas rigs up 100, and miscellaneous rigs down 1.

The U.S. Offshore Rig Count is unchanged from last week at 22 and up 1 rig year over year.

The Canadian Rig Count is up 27 rigs from last week to 159, with oil rigs up 17 to 91 and gas rigs up 10 to 68.

The Canadian Rig Count is up 90 rigs from last year’s count of 69, with oil rigs up 63, gas rigs up 28, and miscellaneous rigs down 1 to 0.

STOCKS TO WATCH

The one group that should be benefit from the rig count rise would be Sand and Basic Materials. Stocks such as SLCA, SND, EMES, and HCLP should benefit from the rise, however these stocks are also near their 52-weeks low. These stocks should gradually bottom out at these levels. Other service companies such as SLB, HAL, BHI, TDW, and OII.

WTI crude prices are up 0.6% at $44.72, rebounding after declining by 4.3% over the two previous sessions. This puts in a little space from yesterday’s six-week low at $44.22.

#WTI = West Texas Intermediate

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Oil Tumbles as Gasoline Supplies Rise

Gasoline inventories increased by 2.1 million barrels last week

The EIA said new production from non-OPEC  producers will be more than enough to meet growth in demand next year

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NYMEX crude fell to $44.70 from $46.20 per barrel following the EIA inventory data which showed gasoline inventories increased by 2.1 million barrels last week.

The street had been expecting a draw of 500k bbls in gasoline supplies. The EIA inventory data also showed a 1.7M bbl fall in crude stocks. The street had been expecting a 2.5 M bbl increase, though the API reported a 2.8 M bbl increase on Tuesday.

The International Energy Agency also said new production from non-OPEC  producers will be more than enough to meet growth in demand next year thus offsetting any cutbacks from OPEC. The U.S., Brazil, Canada and other producers outside OPEC will increase output next year by the most in four years, the IEA said in its initial forecast for 2018.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.7 million barrels from the previous week. At 511.5 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year.

Meanwhile, distillate stocks were up 300k bbls, versus expectations for a 0.5 M bbl rise. Refinery usage rose to 94.4% from 94.1%.

Total products supplied over the last four-week period averaged 20.1 million barrels per day, down by 1.2% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.5 million barrels per day, down by 1.2% from the same period last year. Distillate fuel product supplied averaged 4.0 million barrels per day over the last four weeks, up by 4.1% from the same period last year. Jet fuel product supplied is up 2.7% compared to the same four-week period last year.

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Rig Counts Continue to Rise

Domestic Rig Count now Exceeds that of International Rigs

The worldwide rig count for May 2017 was 1,935, up 18 from the 1,917 counted in April 2017, and up 530 from the 1,405 counted in May 2016

 

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Baker Hughes Incorporated ($BHI) announced today that the international rig count for May 2017 was 957, up 1 from the 956 counted in April 2017, and up 2 from the 955 counted in May 2016.

The international offshore rig count for May 2017 was 202, up 1 from the 201 counted in April 2017, and down 27 from the 229 counted in May 2016.

The average U.S. rig count for May 2017 was 893, up 40 from the 853 counted in April 2017, and up 485 from the 408 counted in May 2016.

The average Canadian rig count for May 2017 was 85, down 23 from the 108 counted in April 2017, and up 43 from the 42 counted in May 2016.

The worldwide rig count for May 2017 was 1,935, up 18 from the 1,917 counted in April 2017, and up 530 from the 1,405 counted in May 2016.

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West Texas Intermediate #WTI is down 29 cents to $47.91 per barrel. Brent is down 37 cents to $49.75 per barrel.

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Crude Oil Lower on OPEC Announcement

The Vienne Group agreed to extend its production cut for another nine months 

Traders had anticipated the move and had pushed prices up ahead of the meeting

 

f1feee7a-1c3b-4f99-983c-97c756824c70
Oil glut continues to push prices lower

The Organization of Petroleum Exporting Countries, #OPEC, ministers meeting in Vienna produced an agreement to maintain production reduction of 1.8 million barrels per day for another nine months. The so-called Vienne Group, which is OPEC nations plus allied oil producing nations, most notably Russia, made the announcement today.

Last week, Kuwaiti Oil Minister said the 9-month production cut was a done deal. He had said OPEC is committed to restore the balance of the oil market and is not ruling out any option for discussion at the upcoming meeting on Thursday, including considering deeper cuts.

Ahead of the meeting, traders had front-run today’s decision, which did not include a positive surprise. The lack of positive surprises (deeper cuts) prompted a sell-the-news response.

crude-20170525
12-Month Chart on Crude Oil with 200-day MA shown

From a #technical standpoint, the reversal in oil comes after its consecutive failed push (on a daily basis) to the $52.00/bbl level, which happened to be the 200-day moving average #MA on the chart (shown in brown). Crude oil made a 2017 high of $55.24 at the start of January, but selling in March pushed the commodity back below its 200-day MA, which happened to be the $52.00 level. Looking at the chart clearly shows the downward trendline resistance. The trendline comes from connecting the highs in January, April and May. Based on the chart, the commodity should see a rebound to the $50 level.

Prices are supported by production cuts from OPEC but have been kept in check by domestic productions. Rig counts in the U.S. have more than doubled in the past 12 months. Canadian rig counts are on the rise too. The Canadian Rig Count rose last week to 85 rigs from last year’s count of 44.

Today’s weakness in oil has weighed on the energy sector. The Energy Select Sector #SPDR #XLE is underperforming the broader averages. At the current price of $66.91, the ETF is down over 1.2%. At that price next support is at $66.16. Resistance is at $67.50. A continued underperformance could impair the broader rally in the S&P 500 (SPX).

Crude has traded today in the range of $48.75 – $52.00. It last traded at $49.00 per barrel. $XOM and $CVX are among losers in the DJIA.

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The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Crude Oil Higher on API Data, OPEC Cuts

oil-rigsGasoline inventories fell by 3.15 million barrels, according to the report;

Kuwait’s Oil Minister said on Tuesday #OPEC is committed to restore the balance of the oil market

 

The American Petroleum Institute #API reported a draw of 1.5 million barrels in crude oil inventories for last week, compared to analyst expectations of  a draw of 2.3 million barrels for the week ending May 19. This week’s crude oil inventory draw was accompanied by across the board draws for gasoline, distillates, and oil at the Cushing, Oklahoma facility as well.

Gasoline inventories fell by 3.15 million barrels, according to the report.

For the Week, distillate inventories fell by 1.85 million barrels—offsetting the 1.8 million barrel build last week.

The U.S. Energy Information Administration report on oil inventories is due Wednesday at 10:30 a.m. EDT.

WTI prices have risen this week, from $48.76 last week to $51.41 per barrel on Tuesday. Brent was trading at $54.11, compared to $51.78 last week.

#WTI = West Texas Intermediate

Prices are supported by production cuts from OPEC but prices have been kept in check by domestic productions.

Kuwait Calls for Deeper Cuts

Kuwait’s Oil Minister said on Tuesday #OPEC is committed to restore the balance of the oil market and is not ruling out any option for discussion at the upcoming meeting on Thursday, including considering deeper cuts.

“All options are on the table and could be discussed. However, any agreement should be satisfactory for all parties. And if necessity arises, we could increase the output cut. But it is premature to talk about that now,” the minister said.

He added that Kuwait fully supports the extension of the deal for nine months, as well as all efforts aimed at rebalancing the global oil market. He added that four other non-OPEC countries—Egypt, Norway, Turkmenistan, and Indonesia—could join the output cuts.

Although signs from OPEC producers point to support for a rollover of the cuts, not all members have voiced support for a nine-month extension. $USO closed at $10.64

#OPEC = Organization of Petroleum Exporting Countries

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The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Rig Count Rise Weighs on Crude Oil

oil_rig#BakerHughes $BHI reports that the U.S. rig count is up 8 rigs from last week to 885, with oil rigs up 9 to 712, gas rigs down 1 to 172, and miscellaneous rigs unchanged at 1.

The U.S. Rig Count is up 479 rigs from last year’s count of 406, with oil rigs up 394, gas rigs up 85, and miscellaneous rigs unchanged.

The U.S. Offshore Rig Count is up 2 rigs from last week to 21 and down 1 rig year over year.

The Canadian Rig Count is down 2 rigs from last week to 80, with oil rigs up 2 to 29 and gas rigs down 4 to 51. The Canadian Rig Count is up 37 rigs from last year’s count of 43, with oil rigs up 13, gas rigs up 25, and miscellaneous rigs down 1 to 0.

On the news, Crude oil prices (WTI) dropped to $47.35 per barrel before rebounding to its current price of $47.35 per barrel.

#WTI – West Texas Intermediate

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Boeing 737 Woes drag DJIA Lower

737maxDJIA component #Boeing $BA is lower, dragging the index lower due to issues with its long awaited 737 Max airplane. The company announced the suspension of #737 Max flights due to a manufacturing issue with low-pressure turbine discs.

Engine supplier CFM International, a joint venture between #General Electric $GE and #Safran $SAFRY , notified Boeing of the manufacturing issue, Boeing said in a statement.

The 737 Max remains in testing and is yet to commence commercial flights.

Shares of plane suppliers #Spirit AeroSystems $SPR , #Textron $TXT , #United Technologies $UTX and #Rockwell Collins $COL followed Boeing lower on the news. Boeing in afternoon trading is down $2.59 to $182.90. DJIA is down 54 units while GE is down 1% to $28.67.

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Pilots Strike Leads to Passenger Brawl!

saveShares of #Spirit Airlines $SAVE are lower by 3% in Tuesday trading after its pilots’ strike forced the carrier to cancel several of its flights.  To make matters worse for the discount airline, a brawl erupted among Spirit Airlines passengers in Florida late Monday after another round of flight cancellations from the carrier, reports Reuters, citing a video of the event.

The cancellations are “just the latest of hundreds” from Spirit, which is engaged in a labor dispute with its pilots, Reuters says. “We are shocked and saddened to see the videos of what took place,” a spokesperson told the news service, adding that its pilots are engaged in “unlawful” strikes.

Footage of the fights spread widely on social media, creating the latest in a string of public relations headaches for U.S. airlines.

At least 11 Spirit flights were canceled at Fort Lauderdale airport on Monday and 31 delayed, according to data.

Hundreds of Spirit flights have been canceled in recent days. On Tuesday, the airline filed for a temporary restraining order against its pilot union.

Broward County Sheriff’s deputies responded to the incident at the airport as about 500 passengers became irate, police said. Video showed people falling down fighting as security officials tried to restrain them.

Three people were arrested for threatening to harm airline employees and challenging them to fight, police said, adding the trio had made the crowd become “increasingly aggressive.”

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