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Oil & Gas Stocks Shine in Market Correction 2025

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Over the past 20 days, the S&P 500 fell 8% due to tariff fears and economic uncertainty. However, oil and gas stocks outperformed, with the Energy Select Sector SPDR ETF (XLE) rising 0.1% over the same period. Unlike past corrections driven by energy demand shocks, this downturn highlights the sector’s defensive appeal.

https://360miq.com/tool?code=SPY,XLE&tf=d&from=2024-12-29&to=

Recent 20-day Performance Highlights

  • ExxonMobil (XOM): +3.2% (3.5% dividend yield).
  • Chevron (CVX): +3.1% (4.3% dividend yield).
  • ConocoPhillips (COP): +3.2% (3.1% dividend yield).
    Stocks benefited from stable energy demand, high dividends, and oil prices stabilizing near $70/barrel despite broader market turmoil.

https://360miq.com/tool?code=COP,CVX,XOM&tf=d&from=2024-12-29&to=

Why Oil & Gas Stocks Outperformed

  1. Defensive Demand: Energy remains essential, insulating the sector from economic swings.
  2. Attractive Dividends: High yields (e.g., Chevron’s 4%) drew investors amid falling bond yields.
  3. Geopolitical & Supply Factors: U.S. sanctions on Iran/Venezuela and OPEC+ production restraint tightened supply, cushioning prices.

Historical Parallels

  • 2008 Crisis: Demand collapse crushed oil prices (-77%) and stocks.
  • 2022 Correction: Supply shocks (Russia-Ukraine war) drove oil prices and energy stocks higher (+16% for XLE).
    The current correction mirrors 2022, with supply constraints (not demand weakness) supporting sector resilience.

Current Market Dynamics

  • Oil Prices: ~$70/barrel (IEA), near 3-year lows due to trade tensions and moderate demand growth (~1 mb/d in 2025).
  • OPEC+ Policy: Plans to unwind voluntary cuts in April 2025 may boost supply, though geopolitical risks (sanctions, Middle East tensions) could offset this.

Future Outlook & Catalysts to Watch

  1. Supply vs. Demand: IEA forecasts 2025 global supply growth (+1.8 mb/d), potentially outpacing demand if economic growth slows.
  2. Economic Health: Trade wars and inflation could suppress oil demand.
  3. Energy Transition: Rising renewables adoption may pressure long-term fossil fuel reliance.

Conclusion
Oil and gas stocks have thrived in this correction, buoyed by dividends, stable demand, and geopolitical supply risks. Investors should monitor OPEC+ decisions, economic trends, and energy transition shifts. The sector offers defensive appeal but faces long-term structural headwinds.

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