The Great Decoupling of Energy Stocks From Oil Creates Carnage - Bloomberg:
This year has been one of moderate gains for the price of oil, but it has been bleak for producers.
West Texas Intermediate crude is heading for an annual increase of more than 30%, but the best performance among the global oil majors has been Chevron Corp., which has posted a gain of just 10%. The S&P 500 Energy Index has almost entirely decoupled from oil in 2019 and is on course to underperform crude by the most since the shale revolution began a decade ago.
The malaise is largely attributable to the gush of supply from quick-to-drill shale wells. The shale revolution has made the U.S. the world’s biggest producer of oil and natural gas. In 2019 it became a net exporter of crude for the first full month in at least 70 years. Production was at a record 12.9 million barrels per day at the end of November, more than Iraq, Iran, Kuwait and United Arab Emirates combined.
But independent U.S. oil companies have become a victim of their own success, boosting production via debt-fueled drilling campaigns at the expense of their own shareholders, who have waited in vain for sustainable free cash flow. The message from investors to producers in 2020 is a simple one: Stop spending our money.
This year has been one of moderate gains for the price of oil, but it has been bleak for producers.
West Texas Intermediate crude is heading for an annual increase of more than 30%, but the best performance among the global oil majors has been Chevron Corp., which has posted a gain of just 10%. The S&P 500 Energy Index has almost entirely decoupled from oil in 2019 and is on course to underperform crude by the most since the shale revolution began a decade ago.
The malaise is largely attributable to the gush of supply from quick-to-drill shale wells. The shale revolution has made the U.S. the world’s biggest producer of oil and natural gas. In 2019 it became a net exporter of crude for the first full month in at least 70 years. Production was at a record 12.9 million barrels per day at the end of November, more than Iraq, Iran, Kuwait and United Arab Emirates combined.
But independent U.S. oil companies have become a victim of their own success, boosting production via debt-fueled drilling campaigns at the expense of their own shareholders, who have waited in vain for sustainable free cash flow. The message from investors to producers in 2020 is a simple one: Stop spending our money.
No comments:
Post a Comment