Oil Price War Erases $196 Billion From Energy Stocks in a Week

(Bloomberg) -- Record lows, trading halts, capitulation and spending cuts made for a wild week in the energy sector after Saudi Arabia and Russia embarked on a war for market share, sending crude and equity prices in a downward spiral.

The S&P 500 energy index never recouped the stunning losses it saw at the beginning of the week, despite the late-day surge in U.S. stocks Friday on optimism for increased coronavirus testing. The sector plunged 24% in its biggest weekly decline since October 2008, outstripping the 8.8% loss in the benchmark and cementing its place as the worst-performing group for the past 5 trading sessions. The group lost about $196 billion in market capitalization this week through Friday’s close, according to data compiled by Bloomberg.

“It’s hard to imagine a world where nothing changes after this,” Spiro Dounis, an analyst at Credit Suisse in New York said in a note to clients, who added that his midstream coverage broke “all the wrong kinds of records” amid the equity and oil rout.

Oil Price War Erases $196 Billion From Energy Stocks in a Week

Energy began 2020 on thin ice with investors, embarking on a campaign to win back generalists. Those hopes quickly faded, as travel curbs and quarantines in response to the coronavirus threat damped demand for oil products. America’s shale drillers have never faced an oil bust quite like this and firms across the energy patch have begun slashing capital spending and reducing dividends in a bid to stay afloat.

Occidental Petroleum Corp. slashed its dividend by 86% after oil prices plunged this week, adding fuel to criticism from shareholders including billionaire investor Carl Icahn that Occidental took on too much debt and destroyed shareholder returns to buy Anadarko Petroleum Corp. last year

There were few spots to hide this week, as sub-sectors from oil servicers to refiners declined. Meanwhile, natural gas driller Cabot Oil & Gas Corp. amassed a 12% weekly advance as some expect the glut of gas to lessen. Even the so-called defensive trades such as pipeline stocks plummeted.

Occidental, along with Apache Corp., Oneok Inc, Noble Energy Inc, and Halliburton Co., were among energy stocks that lost at least 45% this week.

“Should the Saudi Arabian and Russian lunacy persist, we believe that oil prices continue to confront non-trivial downside,” Piper Sandler’s energy team said in a note.

©2020 Bloomberg L.P.

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