Energy Stocks Hit Harder Than Most

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The average price of energy stocks in the S&P 500 fell almost twice as far recently as the broader index’s value.
The shares were down 7.4 percent in five consecutive trading sessions across late February and early March, while the broader index’s aggregate value lost 4 percent over the same period.
Oil stocks led the decline in energy shares.
The price of oil stocks varies with the price of oil, which has fallen 20 percent this year as of 6 March.
Prices were off more than 40 percent as of Monday’s open.
The coronavirus has curtailed manufacturing, shipping, and travel, slashing the demand for fuel across global economic sectors by more than a million barrels a day by some estimates.
The International Energy Agency has said that world oil demand will drop by 465,000 barrels a day averaged across 2020’s first quarter and, compared to 2019, will be off by 1,000 barrels a day averaged throughout this year.
During the last week of February, crude futures fell by the biggest percentage since 2008’s Great Recession.
Those projections helped bring down majors’ share prices – Chevron by 6.3 percent, ExxonMobil more than 5 percent, and Royal Dutch Shell more than 3 percent.
Oil’s shrinking price has fallen just as hard on energy transport and services companies.
Baker Hughes, which provides equipment and services to the drilling industry, saw its share price drop 11 percent; competitor Schlumberger is down 8.6 percent; and the VanEck Vectors Oil Services ETF has fallen more than 8 percent.
Kinder Morgan, which owns pipelines, has lost 5.7 percent.
Refiners Phillips 66 and Valero Energy are both more than 12 percent poorer due to loss of demand for refined products and fears of reduced demand in the future.
Before the virus appeared, the energy sector already was the S&P’s lowest performer during both 2018 and 2019. A lingering global supply glut and slowing world economy has steadily forced prices down through that time.
Goldman Sachs sees no improvement and had forecast $45 oil next month. That prediction is likely to be revised downward now.
TRENDPOST: Oil below $80 makes a large number of U.S. fracked oil and gas wells unprofitable. Normally, producers would shut in the wells until prices rose. But frackers have massive loans coming due over the next four years, and they need to keep pumping to keep their cash flow up.

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