Energy Stocks on Pace for Worst Day in 5 Months as Crude Sinks
Energy Stocks on Pace for Worst Day in 5 Months as Crude Sinks
(Bloomberg) -- Energy stocks were poised for their worst day of the year, with the S&P 500 Energy Index extending its two-day loss to as much as 5%.
The sector has been battered by plunging crude prices, as futures in New York fell below $60 a barrel for the first time since March. Hess Corp., Concho Resources Inc., Cimarex Energy Co., and National Oilwell Varco Inc. were among stocks which slid more than 6%.
A dramatic escalation in the trade dispute between the world’s two biggest economies has jeopardized the outlook for global growth, putting oil on course for its first monthly loss this year. While there’s no shortage of supply risks -- including the possibility that the Organization of Petroleum Exporting Countries will extend output curbs or that energy flows will be disrupted by rising tension in the Middle East -- those concerns have been mitigated by swelling U.S. stockpiles, meaning there’s been little respite for prices.
However, the sharp decline in equities may offer an opportunity, according to Capital One Securities, who in a note Thursday advocated a “more aggressive stance” on exploration and production stocks, citing their under-performance versus oil among reasons. The firm also noted E&P companies’ potential for mergers and acquisitions and continuing capital discipline as reasons to be more constructive on the sector.
Capital One upgraded its ratings on several companies to overweight from equalweight and is now bullish on Bonanza Creek Energy Inc., Berry Petroleum Corp., Callon Petroleum Co., Marathon Oil Corp., Noble Energy Inc., Penn Virginia Corp., SM Energy Co., and Cimarex Energy Co. Additionally, Comstock Resources Inc., Laredo Petroleum Inc., and W&T Offshore Inc. were raised to equalweight from underweight.
To contact the reporter on this story: Michael Bellusci in Toronto at mbellusci2@bloomberg.net
To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Morwenna Coniam, Michael Bellusci
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