Big Oil is pushing the stock market down today, after Chevron (NYSE:CVX) reported a disappointing interim update for its second quarter and oil prices continue to drop, reducing risks to supplies. As of 1:40 p.m. EDT, the Dow Jones Industrial Average (DJINDICES:^DJI) was down seven points to 16,907 and the S&P 500 (SNPINDEX:^GSPC) was just over breakeven at 1,964.

The oil sector is having the largest effect on the Street today. It is followed closely by the financial sector, which is being weighed upon by Wells Fargo's lackluster results, which you can read about here.


Chevron was leading the oil sector's loss, down 1.7% to $128.08 after it reported its interim update for the second quarter of 2014. Chevron produced a total oil equivalent 2.566 million barrels of oil per day, down 0.6% from last year's second quarter and down 0.8% from the first quarter of this year. However, realized prices for oil were 0.5% higher domestically and 1.7% higher internationally quarter over quarter, while realized prices for natural gas were unchanged internationally but down 10% domestically.

Chevron expects its earnings to grow quarter over quarter, but this is primarily from a $500 million-$600 million gain on asset sales in its upstream division. U.S. Big Oil in general faces both currency headwinds and a continuing drop in liquids production internationally, both of which are expected to continue throughout the year.

ExxonMobil and the rest of the oil sector are also down today as oil prices drop. In the U.S., West Texas Intermediate crude dropped 1.55% to $101.36. Brent crude, the international standard, dropped 1.48% to $107.05. Prices are dropping as supplies build up around the world and threats to oil supplies in Iraq and Libya are reduced. In northern Iraq, the Kurds have expanded their control over oil resources. While the Iraqi government complained about the seizure, for world markets the Kurds are a safer hand than the current Iraq government.

At the same time, Libya continues to make progress on reopening oil fields and exports. Last month, Platts reported that Libya was on track to export 300,000 barrels of oil per day. Yesterday, Libya's National Oil Corp. reported that it is now producing 350,000 barrels per day. These are both well below the country's high, but represent a significant increase since exports basically stopped for a period of time earlier this year.