Why Energy Stocks Tumbled on Monday

Energy stocks in the oil and gas sector continued to drop on Dec. 20, as the Omicron variant spread across Europe and the United States over the weekend.

Amy Legate-Wolfe ❯

@amylegatewolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest.

Published December 20, 2021 2:07 pm EST

Energy stocks continued to drop on the S&P/TSX Composite Index, adding to the increasing turmoil left in the wake of Omicron variant surges. Oil prices dropped about US$5 per barrel in early morning trading, combined with even more losses the night before.

What happened?

The weekend wasn’t full of great news, as the Omicron variant of COVID-19 continued to stretch across Europe and the United States. In Canada, several announcements to curb the spread include restrictions not seen since September.

Investors remained worried that the spread could hit the demand for fuel. Many hoped the spread could be put under control, but the cases continue to grow higher and higher. Even as vaccine companies announce their booster may indeed protect against the new variant.

The announcements led to heavy losses for some companies. This included Westshore Terminal Investment (TSX:WTE) Frontera Energy (TSX:FEC), and UR-Energy (TSX:URE) dropping 10% and STEP Energy (TSX:STEP) down 12%.

So what?

These are companies you may want to avoid in the future, as, unfortunately, energy stocks don’t look to be improving anytime soon. Pessimism remains across financial markets, not just in Canada, as the variant spreads. In fact, it also led to one U.S. Senator opposing President Joe Biden’s US$2 trillion infrastructure package over the uncertainty surrounding Omicron.

Much of that infrastructure was aimed at energy stocks, and there are likely to be even less deliveries in January as the virus spreads. And these energy companies, unfortunately, are only likely to see their share price and production decline even further.

Now what?

It’s probably best to stay away from energy stocks in general these days. True, these have been a safe haven in times of turbulence. In fact, when oil prices were down, it used to be that you’d want to pick up these companies in bulk!

Today, that’s no longer the case. The virus continues to stress out energy stocks, but it’s more than that. Now, the world is turning towards new revenue streams through clean energy production. And that simply won’t be these few companies with share prices down.