Virus, OPEC+ Oversupply Fears Weigh Heavily on Oil Prices, Gouge Energy Stocks
Plenty of reason to worry, but we still expect a nearly complete recovery.
The energy sector has been particularly affected by global events in 2020 and sits in a precarious position heading into the second quarter. The Morningstar US Energy Index has trailed the overall domestic market on a quarterly basis, falling 49%, compared with a 19% decline for the overall market. The primary catalyst for the steep underperformance has been reduced demand related to the COVID-19 outbreak and concerns following a breakdown in OPEC+ production cuts with escalating production from Russia and Saudi Arabia. The West Texas Intermediate futures curve price estimate for 2020 has declined 60% since the beginning of the year as a result of a lethal combination of both a supply and demand shock.
U.S. energy index trails the market. - source: Morningstar
Dave Meats does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.