They’re Draining the Strategic Petroleum Reserve Again, and More

The U.S. is selling oil from the Strategic Petroleum Reserve and that’s affecting oil prices, and we also look at moves being made at Amazon and Ford.

Oil

The Biden administration plans to sell another 26 million barrels of crude oil from the Strategic Petroleum Reserve (SPR) and that news is weighing on oil prices. After this latest release, the SPR would be at ~345 million barrels, its lowest level since 1983. That is weighing on oil prices this morning, and as we shared with you recently, we would look to scoop up Energy Select Sector SPDR Fund (XLE) shares below $85 if they get to that level.

The odds of that happening in our view are mixed and will hinge on the near-term speed of the global economy. Next week brings the February Flash PMI data from S&P Global (SPGI), which could either support or conflict with Bank of America’s findings we mentioned earlier. The other item to watch will be the February PMI data for China that will be out in the next few weeks. We would also point out that at some point the SPR will be rebuilt and more than likely add some layer of support to oil prices.

Amazon

Amazon (AMZN) shares are reacting to a Financial Times report that CEO Andy Jassy has vowed to double down on the company’s struggling grocery store business, despite recently announcing that its growth plans were on hold. On its face this conflicts with recent headcount reductions and announced physical store closures.

However, with the Whole Foods business accounting for all of 3.4% of Amazon’s revenue stream, even if it doubled in size, it would still be relatively small potatoes. That said, we are always looking to see how Amazon can disrupt existing business models and it has several technologies from Amazon Pay, its cashierless checkout technology, and Just Walk Out technology that could allow it to do so once again.

Ford Motor

Ford Motor (F) announced it will eliminate 3,800 jobs in Europe over the next three years to adopt a “leaner” structure as it focuses on electric vehicle production and does so in a profitable fashion. Ford continues to target production of its first European-built electric passenger vehicle to start later this year.

Candidly, this has been telegraphed and, especially after the company’s December quarter earnings, it is far from surprising. To us it speaks to the longer-term transformation at Ford and management’s focus on delivering a profitable EV business.