Nov 04, 2020 (Baystreet.ca via COMTEX) -- Expectedly, the crash in oil demand and prices has crushed oil and gas stocks to the point of making the energy industry the worst-performing sector this year.
Not only is the oil and gas industry the biggest market loser of 2020, but it has also now become the worst performer on the market--ever.
This year's oil price plunge is like no other crash in the past that has battered the shares of oil and gas companies.
The pandemic-driven crisis in the oil industry added to the ongoing concern of investors about putting their money into the fossil fuel industry while many governments and some of the largest institutional investors are increasingly looking at supporting and investing in low-carbon energy solutions. An irreversible trend toward a growing share of renewable power sources in the world's energy mix and the growing societal and investor awareness about climate change and carbon emissions had started to weigh on the oil and gas stocks even before COVID-19.
Not even the promises of some European majors to go net-zero and reduce fossil fuel exposure in the energy transition have helped their stocks, as environmentalists and some investors see those pledges as another greenwashing, while others are not convinced yet that Big Oil could build profitable low-carbon energy portfolios without compromising shareholder returns.
Despite the fact that oil prices stayed relatively stable at $40 a barrel for more than three months and recouped some of the losses from the sell-offs in the second quarter, oil stocks have continued to suffer and reach lows not seen in decades.
According to data compiled by Yardeni Research, the energy sector in the S&P 500 index was the worst performer, by a mile, among all sectors between January and October. The energy sector plunged by 52.5 percent year to date to the end of October, compared to a 1.2-percent gain of the S&P 500 index. The second worst-performing sector, financials, lost 22.5 percent during that period.
"The current drawdown in energy is now about 60% more than the S&P's, by far the worst of any sector in history. It exceeds the relative losses in tech after the internet bubble burst and devastation in financials following the Great Financial Crisis," Jason Goepfert, founder of Sundial Capital Research, wrote in a blog post last week. The losses in the energy sector are now the worst in any sector since 1928.
"Going back to 1928, it has been unusual to see any sector, at any point, to lose 35% more from a high than did the broader market," Goepfert said.