The oil and gas sector is the stock market’s worst performer this year, down 10% compared with the broader S&P 500’s 7.5% gain, after leading the market by far last year with a record breaking 59% surge.
While various factors including Russia’s invasion of Ukraine sent commodity prices soaring last year, lifting shares of energy companies, concerns about a slowing global economy and energy demand have dragged down oil and gas prices this year, taking energy stocks down with them.
Investors are shunning mutual funds and ETFs that track energy stocks, pulling more than $7B out of energy equity funds so far in 2023 on a net basis, according to Refinitiv Lipper fund flows data as of Wednesday.
But oil prices and energy stocks could stabilize if fears of a global slowdown subside; supply remains tight, and U.S. oil and gas companies are prioritizing shareholder profits over expanding production capacity.
Energy companies also look relatively cheap from a valuation standpoint, as companies in the S&P 500 energy sector are trading at ~10x projected earnings over the next 12 months, compared with the broad S&P multiple of ~18x.
U.S. and Brent benchmark crude oil fell for a fourth week in a row, with front-month Nymex crude (CL1:COM) for June delivery -1.8% to $70.04/bbl this week, and June Brent crude (CO1:COM) closing -1.5% on the week at $74.17/bbl.
So far this year, U.S. WTI crude -12.7%, and Brent crude -13.7%; during the four-week losing streak, WTI has dropped 15% and Brent has shed 14%.
ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (DBO), (USL), (DRIP), (GUSH), (USOI), (NRGU)
Energy (NYSEARCA:XLE) was this week’s leading loser among S&P sectors, -2.1%.
Top 10 gainers in energy and natural resources during the past 5 days: (ADSE) +45.2%, (IMPP) +42.5%, (VIA) +27%, (FLNC) +25.5%, (CETY) +24.6%, (EOSE) +20.2%, (HNRG) +19.7%, (NEP) +17.8%, (AZRE) +16.3%, (KLXE) +15.1%.
Top 10 decliners in energy and natural resources during the past 5 days: (DFLI) -39.9%, (BE) -25.2%, (ATLX) -19.9%, (PLUG) -19.5%, (EXK) -19.2%, (SBSW) -18.4%, (BPT) -16.6%, (REPX) -16.6%, (NINE) -15.6%, (ERO) -14.6%.