- Energy stocks tumbled as the broader market sold off on Monday, with the S&P 500 Energy Index falling 4.5%.
- Fears surrounding the Delta variant were top of traders’ minds, as the virus could threaten further lockdowns.
- Some observers still see oil rising over the long term as supply struggles to meet demand.
- Sign up here for our daily newsletter, 10 Things Before the Opening Bell.
Energy stocks tumbled as the broader market sold off on Monday, with the S&P 500 Energy Index falling 4.5%.
No company in the index was spared, with the best-performing stock, Texas-based oil equipment maker NOV Inc, losing about 3%. The worst-performing, Diamondback Energy, fell more than 7.5%. The oil majors were likewise pummeled but avoided the worst of the damage: Chevron and ExxonMobil were among the top performers in the energy index.
Energy stocks were hit most notably by declining oil prices, which were at a seven-week low at the start of the trading day. But fears surrounding the Delta variant were top of traders’ minds, as the virus could threaten further lockdowns.
“Because the numbers in places like the UK are getting so large, there now is a realistic concern that this could create lockdowns,” said Jeff Currie, commodities head at Goldman Sachs, on CNBC.
In Currie’s view, a spike in cases driven by the Delta variant might not be enough to derail rising oil prices. Even with OPEC+ agreeing to up oil output, supply continues to undershoot demand; Goldman estimates a deficit of 2.3 million barrels per day.
Mark Haefele, CIO at UBS Global Wealth Management, agreed with Currie, writing in a note on Monday that risk-tolerant investors should go long on oil and the associated stocks.
Goldman and UBS have set their oil price targets at $80 per barrel, while other analysts are eyeing even higher prices. Bank of America is calling for $100 per barrel in 2022.
The S&P 500 Energy Index was down 4.33% as of 2:15 p.m. ET.