This year, the company's energy sector showed the worst dynamics in the US stock market. The aggregate market capitalization of companies from the S&P 500 index included in the industry index of the energy sector has almost doubled to $ 598 billion from the beginning of the year. The cost of the country's two largest oil and gas companies, Exxonmobil and Chevron, has fallen by about 50% and 38%, respectively.

“The energy sector entered the consolidation phase, as a result of which many companies will either decrease in size or disappear,” says Bob Ryan, the main strategist in the raw material markets and energy of the BCA Research. “The survivors will have to navigate in a rapidly changing landscape, where renewable energy sources increase the market share, and the vitality of the fossil fuel sector in the long run causes more and more doubts.”

Analysts calls at least two main causes that negatively affect the industry. The main thing is low oil prices established as a result of a significant reduction in demand caused by pandemia.

After a catastrophic spring fall, when the price of the American WTI even dropped below zero, relative stabilization occurred in the oil market. In the past three months, the price of WTI ranges at $ 40 per barrel. Despite the rise in price of oil, the price situation has just turned “from terrible to mediocre,” says Stewart Glikman, senior analyst in the CFRA stock market, as a result of which “many shale miners in the United States barely avoid losses.”

Oil demand remains low. People are still less mobile, and commodity flows are more modest than before the beginning of the pandemic; This means that an excess of oil supply, which was formed in the US market at the end of March, has not yet been exhausted.

Another negative factor for the oil and gas sector is an increase in alternative energy. Shares of companies involved in the extraction of fossil fuel were affected by the change of preferences of many investors that have been transferred to the shares of companies working with environmentally friendly energy sources; The shares of such companies this year have grown by almost 80%.

Some analysts also believe that investors are afraid of the consequences of Joe Biden’s victory for the oil and gas sector. These fears exist despite the fact that under previous democratic administrations, the shares of energy companies showed better price dynamics than during the presidency of Donald Trump. It is assumed that Biden’s plans to combat climate change, which include electrification of the transport sector and restriction of harmful emissions, may have significant financial consequences for oil and gas companies.

Translated by Victor Davydov

Oil prices did not help the shares of energy companies