U.S. energy stocks are performing farther below the S&P 500 average than at any time since Japan attacked the U.S. Navy at Pearl Harbor in 1941, according to the Bank of America.
Meanwhile, in mid-month, investors rushed to dump energy-related junk bonds, driving borrowing costs for the riskiest companies to their highest since August 2016.
The immediate causes: oil prices have fallen 15 percent this year from levels that already were low, and gas prices, now around $2 per thousand Btu’s, are near their record bottom.
Also, with the coronavirus shutting down large swaths of the world economy, the global oversupply of energy will swell even more.
Coal has crashed as well. Prices peaked above $75 a ton in early 2019 and have sunk to around $45 today. At least 11 U.S. coal companies have declared bankruptcy in the last three years.
Oil: Bad to Worse
Oil continued its long-term price slide, with Brent crude crashing down below $50 a barrel and Texas intermediate under $45.
Prices are expected to languish as the coronavirus’s economic impact pares at least 400,000 barrels a day from world demand as factories close or reduce output and thousands of daily airline flights are canceled.
That much of a drop would take global oil demand to its lowest point in seven years, according to Warren Patterson, chief commodities strategist at ING.
OPEC and its partners are scheduled to meet on Thursday in Vienna. Prior to the coronavirus outbreak, Russia signaled they were against further production cuts from the 1.7 million barrels a day that have been taken off the market.
TRENDPOST: The U.S. fracking boom has flooded markets with gas and oil in record volumes, adding to the global oversupply, and producers are still drilling new wells. Also, many oil companies went deep into debt to get in on the fracking frenzy, and those loans are starting to come due at a time when low prices are leaving producers short of cash.
