Energy worst performing sector of 2017

by Laura Ehrenberg-Chesler on June 22, 2017

in Economic Indicators,Energy

According to Ed Yardeni the Energy sector is the worst performing sector in the S&P, down 13.5%, and many of the sector’s industries are doing even more poorly: Oil & Gas Drilling has lost 36.4% ytd, Oil & Gas Exploration & Production has lost 20.5%, and Oil & Gas Equipment & Services is down 19.3% He also offers a fairly succinct summary as to why that is:

1) The U.S. is pumping.
2) Brimming inventories. Excess production has kept US inventories stubbornly high.
3) Sluggish demand due to more energy efficiency, lackluster pace of global activity, and alternative fuels.
4) The potential for Saudi Arabia to implement a strategy where they sell as much oil as possible, regardless of price, as they diversify away
from dependence on energy.
5) The S&P 500 Energy sector’s market weighting in the S&P 500 has shrunk to 6.0% from its peak of 16.1% in July 2008. Likewise, the amount of
earnings it contributes to the broader index is now 4.3%, down from 21.3% then.

It remains to be seen whether low prices will cause producers to curtail production and at least provide a floor for prices in the future.

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