Unsuccessful Performance of Energy Stocks in the US Stock Market

Energy stocks in the US stock market, despite a significant performance in 2016, have appeared unsuccessful this year and are expected to remain unstable due to the uncertain trend of crude oil prices. Reuters reported: "Last year, following expectations of rising prices due to production cuts by major producers and increased hopes for industrial investment after Donald Trump's election as President of the United States, the energy sector performed better than other sectors, with energy stocks rising about 24%." However, according to Reuters, energy stocks have shown "weak performance" after peaking in mid-December and have the worst performance among the 11 sectors of the market according to the American credit rating agency Standard & Poor's in 2017. The report states that due to uncertainty regarding demand and unexpectedly high crude oil and petroleum product inventories, oil producers had the "weakest performance" among energy sub-industries. Meanwhile, despite a 6% rise in 2016, the S&P 500 energy stock index fell about 5% in 2017. Oil stock prices, along with their prices, had an upward trend in late November. However, this upward trend halted after the November 30 agreement by OPEC to cut production failed to alleviate concerns about oversupply and did not raise prices above the $5 per barrel range. According to Reuters, since the performance of all oil companies is not the same, their stock values are also not uniform. Analysts say that production companies, especially those operating in US shale areas, are likely to benefit the most. The report suggests that a strengthening economy and rising oil prices may increase profits for American companies like ExxonMobil and Chevron. Increased demand for energy and defense consumption may also accelerate demand growth. It should be noted that the defense sector is a major energy consumer. Kristensen Ledo, a securities manager at South Texas Money Management in San Antonio, told Reuters: "When oil prices are stable, stocks of major oil companies will be profitable, while other energy categories will be very risky at this point." Meanwhile, investors are awaiting the potential impact of Mr. Trump's policies. Since his election, refinery stocks have increased by more than 9.5%, while oil producers have seen less than a 2% profit, which is the weakest performance in the energy sector.