Energy stocks may be down, but not out

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Energy stocks may be down, but not out GlobeInvestor

From 1984 to 2019, the energy sector in the U.S. has produced an average gain of 6.9 per cent and has been positive 81 per cent of the time during its strong seasonal period from Feb. 25 to May 9.Oil and energy sector stocks performed poorly for most of 2019 because of sluggish growth in China and a weaker economic outlook from the European Union. That trend has persisted into 2020 thanks to the recent coronavirus outbreak and heightened fears of a further drop in demand for energy.

The seasonal period for the energy sector is largely the result of supply and demand imbalances that occur in late winter and early spring. The largest demand for oil during the year takes place as the driving season starts in spring. The official start of driving season occurs on Memorial Day, which lands on the last Monday in May.

There are many variables – including geopolitical risk, policies from the Organization of the Petroleum Exporting Countries and its allies and others – that affect the price of oil and energy stocks. If the coronavirus that’s currently a global emergency has a much larger impact than expected, then the energy sector could deteriorate further as global economic growth slows down – or vice-versa.

 

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