What happened

Shares of integrated energy giant Chevron (CVX 0.23%) fell roughly 12% in February, according to data from S&P Global Market Intelligence. Peer ExxonMobil's (XOM -0.25%) stock dropped even more, declining by 17%. Drilling-focused ConocoPhillips (COP -0.68%), meanwhile, was off a bit more than that, with its price falling by a little over 18%. By comparison, the S&P 500 Index fell around 8% in the month. 

A pair of hands stained with oil.

Image source: Getty Images.

If you look to the start of the year, however, the picture changes a bit. Chevron's stock price was off by 22% in the two-month span, Exxon's was down by 26%, and ConocoPhillips fell about 25%. Over that same period, the S&P's decline is still just about 8% or so. The coronavirus is important here, but there's a bigger story for these energy companies than the broad market drop that took place in February.

So what

Obviously, the COVID-19-led sell-off has dragged Chevron, Exxon, and ConocoPhillips down along with it. But this is more than just market fear -- note that the trio of stocks began falling as soon as the virus started to gain increased global attention at the start of the year. The logic here is pretty simple.

Oil and natural gas have been in an oversupplied situation for some time, as growth in U.S. production has taken off in recent years. So the prices for these key global commodities were already weak. China, meanwhile, is one of the largest sources of demand for oil and gas. As that country started to take steps to contain the spread of the coronavirus, it was clear that energy demand was going to be impacted. With an already-oversupplied energy market facing a demand shortfall from one of its largest demand centers, oil prices quickly responded by, as you might have guessed, declining. The share prices of oil producers went along for the ride. All of that began well before Wall Street started to get the COVID-19 jitters in February.

Chevron has been the least impacted of this trio. That's likely because it had pulled back on spending before any of the coronavirus issues. Management has been touting that it has the lowest capital investment plans relative to cash flow of any of its major oil peers. Thus, an oil price decline would hurt, but perhaps not as much as at a peer like Exxon, which has been ramping up its spending plans. Spending up to $35 billion a year to find more oil when oil prices are falling isn't exactly a great backdrop for stock price gains at Exxon. Add in the demand shock from COVID-19 and that spending looks even less desirable to investors.    

ConocoPhillips, meanwhile, has been hard hit because it is focused exclusively on oil and natural gas drilling. Since the driller spun off its downstream (pipeline and refining) operations years ago, oil's ups and downs have a bigger impact on its financial results because there's no other businesses to provide an offset. Essentially, ConocoPhillips has doubled down on oil, and right now that's not working out too well.

Now what

Investors in Chevron, Exxon, and ConocoPhillips should be prepared for more volatility... and more downside risk. Even if China begins to recover, which should help support demand for oil and natural gas, COVID-19 is starting to spread to the rest of the world. That will likely mean demand concerns remain front and center and, thus, oil prices could stay weak or even fall further. And if COVID-19 leads to a global recession, well, the pain could get pretty intense.