Oil ETFs Drop On Chevron Earnings Report (USO, DBO, OIL, USL, CVX)

---

Oil ETFs dropped today as Chevron released negative earnings report

Oil ETFs such as the United States Oil Fund LP ETF (NYSEARCA:USO), the PowerShares DB Oil Fund ETF (NYSEARCA:DBO), the iPath S&P GSCI Crude Oil Total Return Index ETN (NYSEARCA:OIL), and the United States 12 Month Oil Fund LP (NYSEARCA:USL), all dropped more than .20% today as negative earnings from oil major Chevron (NYSE:CVX) likely spurred decline.

Chevron (NSYE:CVX) reported negative earnings today; the company made $5.16 billion for fourth quarter 2011 compared to $5.3 billion profits in forth quarter 2010.  Chevron’s decline in earnings is likely due to a decrease in overall global oil production, which has slipped to from 2.79 million barrels of oil per day to 2.64 million barrels of oil per day.

The overall decline in oil production is likely the cause of reduced oil prices, as production has likely been dwindling due to slower than expected US economic and European economic growth.  The Iran-US dilemma also has some affect on oil prices lately, as EU and US oil sanctions on Iran will likely diminish supply which will thus increase prices.  Although the US and the EU have yet to impose sanctions, Iran has threatened to shut down the Strait of Hormuz soon and close off oil exports to Europe next week if the sanctions are imposed.   Seeing how Iran’s economy relies almost solely on oil, it is difficult to see how Iran could afford such closures amid political pressure from the Western World.

Oil ETF Summary:

1. United States Oil Fund LP ETF (NYSEARCA:USO): -0.07 (-0.18%)
2. PowerShares DB Oil Fund ETF (NYSEARCA:DBO): -0.07 (-0.24%)
3. iPath S&P GSCI Crude Oil Total Return Index ETN (NYSEARCA:OIL): -0.08 (-0.32%)
4. United States 12 Month Oil Fund LP (NYSEARCA:USL): -0.10 (-0.23%)

Bottom Line: Oil ETFs likely fell today because of disappointing earnings reports from Chevron and an overall lack of demand for current oil supplies across the world due to current US and European economic conditions.  Typically oil prices rise as economies grow, and growth in Europe and the US is limited at best.  Any issue with Iran will raise oil prices temporarily however it is hard to believe that the US or Europe would stand for such Iranian oil chokeholds for very much time.

Sign up for our free newsletter!

Disclaimer: Wall Street Sector Selector trades a wide variety of ETFs and positions can change at any time.