For all the highs, there’s always a low, and today’s latest CNBC ETF spotlight (video featured below) puts focus on the oil sector. Brian Sullivan goes over why it’s been a rough year for the oil market.
As Sullivan explains, it’s been a brutal period for the sector, with oil stocks falling more than the price of oil. It’s been strange as well, given the price of crude oil has held up this year, given the slowing of global demand, combined with OPEC cutting output.
None of this has helped oil and gas stocks. Looking at SPDR S&P Oil & Gas Exploration & Production ETF (XOP), one of the leading oil and gas exploration ETFs, Sullivan reports how the price of energy stocks used to match up with the price of crude oil when comparing charts, only for that to have changed within the past few months.
With that, “Companies operating in certain areas have been hit harder,” Sullivan adds. He continues, “The average stock that operates [in North Dakota], the continentals, the oases of the world, down 59% in a year; Oklahoma not far behind.” Not fairing quite as bad are the stocks focused around the offshore areas of the south.
To provide further perspective, Sullivan notes, “Half of all oil and gas stocks have lost more than half their value in just the past year, and the market weighting guys – under 5% for the first time in almost 20 years.” It’s been a significantly disrupted group.
In response to why this has occurred, Sullivan speculates this major change comes as a result of no return on invested capital. Investors have given up after seeing nothing coming back. Environmental pressure on some of the big institutions could also be playing a role.
All of this in mind, super big-caps such as Exxon Mobil (XOM) and Chevron Corporation (NYSE: CVX) have held on reasonably well, though that’s due to dividends.
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