O&G Stocks Under Pressure Amid Coronavirus Outbreak
06/02/2020 - 08:56
Short-term pressure on oil prices
Concerns about global oil demand are on the rise which is reasonable given that China is the world’s largest oil importer. WTI at US$51.6 and Brent at US$55.6 per barrel have both fallen c. -20% since early January. US Energy Information Administration forecasts average 2020 prices of US$59.25 for WTI (+3.9% YoY) and USD 64.83 for Brent (+1%), but these pre-CoV expectations could face downside risk.
O&G shares are also under pressure. Sector bellwethers such as GAS, PVS, and PVD have corrected 15%-20% from their early 2020 peak levels. Since Dec 2019, the correlations of sector names and oil prices have remained high: GAS (65%), PVD (76%), and PVS (69%).
20200203 OG sector note