Energy stocks saw a decline on Wednesday as the price of oil continued to plummet. The rising interest rates have sparked concern about a potential slowdown in the economy, which could subsequently impact demand.
According to Dow Jones Market Data, front-month Nymex futures for West Texas Intermediate crude for November delivery experienced a 2.8% drop to $86.74 on Wednesday morning. This marked the largest one-day dollar and percentage decline since June 22. Additionally, Brent crude, the international benchmark, fell by 3.1% to $88.12.
The Federal Reserve has indicated that it may raise its target for the fed-funds rate higher than previously anticipated and keep it elevated for a longer period. Furthermore, yields for longer-dated Treasury debt have been increasing. These factors increase the cost of longer-term loans, such as mortgages, potentially leading to negative consequences for the housing market.
Despite the Energy Information Administration reporting a decrease in U.S. commercial crude inventories by 2.2 million barrels for the week ending September 29 compared to the prior week, crude prices declined. Stockpiles currently stand at 414.1 million barrels, approximately 5% below the five-year average for this time of year.
The decline in oil prices had a direct impact on the energy sector, with the S&P 500 Energy Sector experiencing a 3.1% decrease. This makes it the worst-performing sector in the market, putting it on track for its largest percentage decrease since May 2.
Several major energy companies also saw their stock prices tumble as a result. Chevron (CVX), for example, fell by 3.2%, making it the worst performer in the Dow Jones Industrial Average. Similarly, Devon Energy (DVN) was on track for its lowest close since December 2021 after dropping 3.8%. Other companies like Phillips 66 (PSX), Schlumberger (SLB), and Marathon Petroleum (MPC) also experienced decreases of 4%, 3.5%, and 3.3% respectively. Halliburton (HAL) and Occidental Petroleum (OXY) saw declines of 4.4% and 4.2%.
In conclusion, as oil prices continue to fall, energy stocks have taken a hit. The combination of rising interest rates and concerns about the economy’s growth potential has led to investor unease and negative consequences for the energy sector.
