European Oil Stock Rally Loses Steam After Best Streak in Decade

(Bloomberg) -- After completing their longest winning streak in 11 years, European energy shares are losing momentum.

While the Stoxx 600 Oil & Gas Index on Monday fell for the first time in 10 sessions, a closer look suggests it’s not just having an off day. The Relative Rotation Graph below shows that the index whose ticker is SXEP is moving from the leading quadrant to the weakening one -- a sign the ascent is slowing.

European Oil Stock Rally Loses Steam After Best Streak in Decade

“It’s time to take profit on European oil stocks amid some caution about the fourth-quarter earnings support,” said Jason Kenney, a London-based analyst at Banco Santander SA.

His peers at Oddo Securities and Canaccord Genuity, however, see room for further gains on bets that rising crude will improve free cash flow of oil companies. Analysts are forecasting earnings-per-share near the highest in 10 years for European energy stocks, although projections have weakened in the past week.

Stoxx 600 energy shares rose 5.4 percent this year through Friday -- more than twice as much as the broader European benchmark -- boosted by gains in crude as the Organization of Petroleum Exporting Countries and its allies curb supply to drain a global glut. The sector was one of the biggest losers in European equities last year on concerns about the outlook for oil prices.

Retail shares, also among the worst performers of 2017, have moved from the lagging quadrant to the improving one.

©2018 Bloomberg L.P.