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Energy Stocks Slump Again On China Virus Fears

Michael Bellusci

(Bloomberg) -- Energy stocks have quickly reverted to being among 2020’s worst performers as fears increase that China’s deadly coronavirus will hit oil demand.

The S&P 500 energy index fell as much as 2.2% early Monday, extending its drop for a sixth-straight session. The group is down over 7.5% this month as West Texas Intermediate hovers just above $53 per barrel.

“Energy has gone from buy the dip to don’t touch, at least in the near term,” Piper Sandler analysts led by Bill Herbert wrote in a note to clients. The sector’s underperformance comes as the group is already battling weak investor interest and attempting to undo last year’s underperformance.

Stock laggards Monday include HollyFrontier Corp., Concho Resources Inc., Schlumberger Ltd. and Halliburton Co., all down about 3% or more. Fourth-quarter earnings for the group continue, and some analysts are pondering whether or not 2020 guidance updates can bring some optimism.

“We expect 4Q E&P earnings to come with capital-efficient ‘20 guidance,” Morgan Stanley wrote in a note to clients. “While this offers a tailwind through earnings season, the macro backdrop remains challenging, supporting our preference for E&Ps with low costs & scale,” the bank added.

To contact the reporter on this story: Michael Bellusci in Toronto at mbellusci2@bloomberg.net

To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Steven Fromm

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