Please ensure Javascript is enabled for purposes of website accessibility

Oil Stocks are Getting Crushed Today as Crude Prices Plummet

By Jason Hall - Feb 27, 2020 at 1:56PM

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

A double-digit drop in crude prices over the past week continues, and investors are fleeing the oil and gas sector.

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 (CHKA.Q) (12.5%) (43.6%)
Continental Resources (CLR -2.13%) (15.5%) (31.8%)
Denbury Resources (DNR) (7.5%) (23.5%)
Gran Tierra Energy (GTE -5.47%) (10.8%) (22.8%)
Oasis Petroleum (OAS) (7.3%) (29.8%)
Vermilion Energy (VET -5.14%) (10.1%) (28.7%)
Whiting Petroleum (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.  

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

Chesapeake Energy Corporation Stock Quote
Chesapeake Energy Corporation
CHKA.Q
Continental Resources, Inc. Stock Quote
Continental Resources, Inc.
CLR
$66.25 (-2.13%) $-1.44
Whiting Petroleum Corporation Stock Quote
Whiting Petroleum Corporation
WLL
Gran Tierra Energy Inc. Stock Quote
Gran Tierra Energy Inc.
GTE
$1.21 (-5.47%) $0.07
Denbury Resources Inc. Stock Quote
Denbury Resources Inc.
DNR
Oasis Petroleum Inc. Stock Quote
Oasis Petroleum Inc.
OAS
Vermilion Energy Inc. Stock Quote
Vermilion Energy Inc.
VET
$19.93 (-5.14%) $-1.08

*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
319%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/30/2022.

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.