Tullow Oil (LON: TLW) share price has been in a strong downward trend in the past few months amid rising concerns of the company’s growth and profitability. The stock was trading at 30p on Thursday, a few points above the year-to-day low of 25.90p. It remains about 53% below the highest point in 2022.
Crude oil price challenges
Tullow Oil, like other companies, did well in 2022 as crude oil prices remained at an elevated level. As a result, the company’s revenue jumped to $1.78 billion, helped by higher oil prices. Its profitability also jumped as gross profits soared to $1.086 billion while profit after tax rose to $49 million. Tullow Oil reduced its total det from over $2.3 billion to about $1.8 billion.
Therefore, the current stock price performance is mostly because investors believe that the good days are behind of it. For one, crude oil prices have come under pressure this year, with Brent trading at $75 and West Texas Intermediate (WTI) at $71.
In all, oil prices have dropped by 15% from the highest point this year and by ~45% from its highest level in 2022. As I wrote earlier this week, analysts at Goldman Sachs believe that oil price growth will be slower than expected. They downgraded their estimates from $100 to $94.
Therefore, this price action means that Tullow Oil shares will remain under pressure this year. The same is true for other oil majors like Shell and BP. Tullow, however, as a smaller company, might struggle more than supermajors because of its production capacity.
Tullow is also going through challenges in Kenya, where it has been struggling to find a strategic partner. As I wrote in this article, securing that partner will be tough, especially if oil prices come under pressure.
Tullow Oil share price forecast
The daily chart shows that the TLW share price has been in a strong downward trend in the past few months. Most recently, the stock managed to move below the lower side of the falling wedge pattern shown in green. In price action analysis, this pattern is usually a bullish sign. As such, moving below it invalidated the bearish sign.
Tullow has moved below all the moving averages. Therefore, with the macro challenges going on, there is a possibility that the stock will continue falling. If this happens, the stock will likely drop and hit the key support at 20p.
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