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Oil stocks are lagging behind the recent gains in crude prices.
Frederic J. Brown/AFP via Getty Images
Oil prices have jumped 15% in the past month, but oil stocks are flat over the same period. It’s a frustrating result for some investors, who are waiting for a shift in sentiment—or perhaps some mergers—to lift the industry.
Brent crude futures
,
the international benchmark, have jumped over the past month to a recent $93 per barrel. Oil prices have been lifted by Russia and Saudi Arabia’s decision to cut production through the end of the year. The reduced output from major oil-producing countries has left the world with a deficit of oil, and that has forced refiners to pull oil out of storage to supply fuel and chemicals to customers. Shortages lead to higher prices.
Oil stocks, however, haven’t done much at all. The
SPDR S&P Oil & Gas Exploration & Production ETF
(ticker: XOP) is actually down slightly—less than 1%—over the past month. Part of the reason could be the stocks had outpaced oil prices earlier in the year, and oil is just now catching up. But it also appears to reflect expectations for oil and the broader economy. The futures market is predicting a drop-off in oil prices next year, with Brent futures expiring next May trading at $88. Concerns about broader economic weakness might be weighing on shares, too.
“I think it is as simple as investors don’t think that the recent sizable rally in oil prices is sustainable and that there is still risk to the economy and oil at this point in the cycle,” wrote Roth MKM analyst Leo Mariani, in an email…
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