Is now the time to short Tullow Oil?

The UK-based oil and gas company’s shares are down 70% this year, with oil prices collapsing under the weight of the economic fallout from Covid-19. But is it time to short Tullow Oil?

Tullow Oil shares are down 70% year-to-date, with the stock struggling amid weakening demand for oil as a result of the Covid-19 pandemic.

Unsurprisingly, short interest in Tullow Oil has grown in recent weeks, with Värde Partners Europe increasing their position against the stock in April to 2.64%.

Tullow Oil shares find support but for how long?

After hitting a low of 7p a share on 18 March, Tullow Oil has seen its shares rebound by 130% - closing at 17p on Thursday.

However, with oil prices continue to fall as demand for the commodity hit a 25-year low on Wednesday, pressure is mounting on the stock and short interest could continue to build.

Earlier this month, Tullow Oil is trading Tullow Oil said that it is targeting capital expenditure of around $300 million in 2020, down from its previous guidance of $350 million.

‘Savings have been identified primarily through the deferral of activities across the portfolio and through savings that can be realised by ongoing farm-down activities,’ the company said in a statement.

‘In Ghana, for example, savings will be made through the early termination of the Maersk Venturer rig and the deferral of some well activity, combined with the removal of any non-critical work that does not focus on safety and asset reliability.’17p a share as of 14:30 (GMT) on Thursday.

IEA tells oil market to brace for lowest demand in 25 years

The International Energy Agency warned the oil market on Wednesday to brace itself for the lowest level of demand the sector has seen in 25 years as a result of the global coronavirus lockdown.

The energy regulator said that oil demand in April will likely hit its lowest level, falling to 29 million barrels of oil per day (bopd) below last year’s average.

‘Even assuming that travel restrictions are eased in the second half of the year, we expect that global oil demand in 2020 will fall by 9.3m barrels a day versus 2019, erasing almost a decade of growth,’ the IEA said.

The IEA also made it clear that OPEC+ supply cuts will do little to offset the impact the Covid-19 pandemic is having on global demand and declining oil prices.

Echoing similarly negative sentiments, the International Monetary Fund said that the economic impact of the coronavirus crisis will likely bring about the deepest recession since the Great Depression.

How to trade stocks with IG

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  • Enter ‘Tullow Oil’ in the search bar and select it

  • Choose your position size

  • Click on ‘buy’ or ‘sell’ in the deal ticket

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