- Oil stocks are in the tank after the coronavirus turned out to be worse than expected.
- China’s oil consumption is reportedly down (%.)
- Citi slashed its oil price outlook and is eyeing the $ (level.)
In early January, oil stocks were Wall Street’s darlings as tensions between the U.S. and the Middle East escalated, threatening supply and sending investors on a buying spree. What a difference a few weeks can make. While other sectors such as the banks are enjoying record earnings, oil is in the tank, with a projected drop of nearly 54% in Q4 bottom-line results for the sector vs. a year ago, Yahoo Finance reports.
Fears surrounding a worsening coronavirus epidemic in China coupled with dampened demand for the commodity have sent the oil price spiraling , taking the stocks of some heavy industry hitters down with it . British oil giant BP (NYSE: BP) and Exxon Mobil (NYSE: XOM) are both sharply lower today and have been in a downward trend for weeks. Tesla’s 24% – plus gains in today’s trading session alone offer add insult to injury for the fossil fuel sector, with one Elon Musk fan suggesting on Twitter that TSLA should replace XOM in the Dow Jones. That would be a wild ride.
From the looks of it, market conditions aren ‘ t expected to improve for the oil sector anytime soon. Citigroup has slashed its Brent Crude forecast from $ 91 to $ , Bloomberg reported, warning that $ oil is not outside the realm of possibility, which would be the lowest level for the commodity in more than two years. China’s oil consumption has fallen about 29% in the wake of the coronavirus, and there’s no clarity on whether things will get worse before they get better. According to the Citi report:
There remains plenty of uncertainty, with much still depending on how far the virus spreads and the duration of the outbreak.
While coronavirus is largely to blame for the woes that the energy sector is experiencing in the current quarter, it’s not the only factor. According to CNBC’s Jim Cramer, sustainable investing is all the rage
Oil companies aren’t known for always helping their cause. Over the weekend, an oil spill of more than gallons [Fox Business] polluted a bay outside of Houston. While it pales in comparison to the BP oil spill of 2020, it’s also the last thing that the energy sector needs given the heightened focus on sustainability.
article was edited by Samburaj Das
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