What happened

The oil and gas industry sell-off intensified on Feb. 27, as fears over the global spread of coronavirus accelerated. Crude prices are down another 2% today, adding to a sell-off that's seen both Brent and West Texas futures fall 12% over the past week. 

The sharp decline in oil prices is hitting oil stocks even harder. Today, dozens of companies across the oil and gas value chain have seen stock prices fall by double-digits, including a number of well-known and smaller independent oil and gas producers. Here are some of today's biggest losers as of 1:29 p.m. EST, and their losses over the past week.

Stock Price change on 2/27/20 Price change since 2/20/20
Chesapeake Energy (OTC:CHKA.Q) (12.5%) (43.6%)
Continental Resources (NYSE:CLR) (15.5%) (31.8%)
Denbury Resources (NYSE:DNR) (7.5%) (23.5%)
Gran Tierra Energy (NYSEMKT:GTE) (10.8%) (22.8%)
Oasis Petroleum (NYSE:OAS) (7.3%) (29.8%)
Vermilion Energy (NYSE:VET) (10.1%) (28.7%)
Whiting Petroleum (NYSE:WLL) (20.4%) (36.8%)

Data source: Yahoo! Finance. 

So what

The financial news over the past week has been dominated by the acceleration of the spread of COVID-19, the deadly and highly infectious strain of coronavirus that was already wreaking havoc in China. It has been expected for a couple of weeks that China's economy would take a hit in the first quarter, with the International Energy Agency warning earlier this month that global oil demand was likely to fall in the first quarter as a result. 

Oil pumpjacks at sunset.

Now is a tough time to be an oil producer. Image source: Getty Images.

Things have only worsened since then, with news over this past weekend that the number of COVID-19 cases in multiple countries, including in Italy, Japan, and South Korea was growing. As the spread accelerates, oil markets have continued selling off, fearing an already-oversupplied global oil environment is set to get even worse on shrinking demand. 

Now what

Uncertainty continues driving the markets downward, and it's likely that independent oil and gas producers like the ones listed here could see even more pain going forward. Even before news that China's oil consumption would likely fall enough to drag global oil demand down in Q1, producers were already facing a market that had more supply than it needed, plus excess capacity that could further saturate the market. 

Yes, some strong stocks are getting beaten up along the way, and I expect in hindsight we will look back and realize this recent sell-off was a buying opportunity for some of these producers.

But as things stand, there's so much uncertainty in the oil markets, and given the potential implications for coronavirus to affect the global economy, I think investors would do well to let things play out a bit more before committing any capital in what continues to prove a difficult sector. If we do see a global recession, things are likely to get much worse before they get better, and independent oil producers are on the front lines -- and most at risk -- if that happens. Now may be a better time to make sure you're prepared for a recession, rather than trying to catch falling knives.  

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.