Please ensure Javascript is enabled for purposes of website accessibility

Why Oil Stocks and Oilfield Services Stocks Are Slumping Today

By Rich Smith – Sep 17, 2019 at 2:16PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Saudi Arabia's quick bounce-back in oil production deflates the oil rally -- but this story isn't over yet.

What happened

Gee, that was fast!

After initially surging on news that drone and missile attacks in Saudi Arabia had knocked half that country's oil production and refining capacity offline over the weekend, oil prices -- and oil stocks -- are taking a hit today. Perversely, this hit is in response to some really good news (for consumers, at least).

Over the weekend, Saudi Arabia had suggested that perhaps a third of the oil production capacity that was taken offline over the weekend might be restored by the end of Monday. But this morning, the country confirmed that progress has been faster than initially hoped, and as much as 70% of the production capacity shut down over the weekend may have already been restored -- with the remainder to be back online within the next two or three weeks.

Oilfields ablaze in Kuwait during the first Iraq War

Image source: Getty Images.

So what

Oil prices are down in response, with the prices of both West Texas Intermediate crude and Brent crude off 4% as of 12:40 p.m. EDT today.

Oil stocks are tumbling as well. In particular:

  • Shares of Nabors Industries (NBR 9.82%) are down 6.4%.
  • Shares of Patterson-UTI Energy (PTEN 7.58%) are down 6.5%.
  • And W&T Offshore (WTI 9.04%) is off a whopping 10.1%.

Now what

And perhaps rightly so. After all, investors bid up oil stocks in general yesterday on hopes that higher prices would mean higher profits for oil producers such as ConocoPhillips. The longer supplies remained interrupted, the more time such companies would have to pump oil and sell it at high prices -- and conversely, the sooner production is back up and running, the less time these companies have to reap windfall profits.

The situation for oilfield services companies like Nabors and Patterson-UTI, though, may be even more acute than for W&T Offshore (although right now, the latter company is taking the bigger hit). After all, rather than profit immediately from selling oil they have on hand, companies like Nabors and Patterson-UTI have to wait for their oil-producing clients to decide that high prices are going to stick around for awhile, and hire them to help increase production.

Now that it looks like high prices might not stick, the prospects for beaucoup profits at these companies are quickly dimming.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Nabors Industries Ltd. Stock Quote
Nabors Industries Ltd.
$111.41 (9.82%) $9.96
W&T Offshore, Inc. Stock Quote
W&T Offshore, Inc.
$6.39 (9.04%) $0.53
Patterson-UTI Energy, Inc. Stock Quote
Patterson-UTI Energy, Inc.
$12.56 (7.58%) $0.89

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.