It’s not like oil and gas were doing all that well to begin with, but Monday’s stock market selloff hit the sector unsparingly, tossing all related fuels into the same sinking barrel.
Oil future prices at West Texas Intermediate hub were at $38.20 per barrel on Monday, just before market close, a level not seen since 2009.
“You’re certainly testing new lows there,” said Mark Hanson, an equity analyst with Morningstar. “Just psychologically, once you’ve gone through the [$40] floor, it probably induces some panic.”
The list of industry stressors goes on: global oversupply of oil unleashed by successful shale fracking, potential for more Iranian oil to enter the picture, weakening Chinese demand.
“Everything has kind of coalesced here,” Mr. Hanson said.
Natural gas, whose precocious descent began three years ago, ended at $2.67 per million British thermal units at 4 p.m. on Monday, a six-week low but still not far from the range it has occupied all year.
And while the Marcellus Shale that underlies much of Western Pennsylvania is consistently ranked at the top of the most economic shale plays in the country, companies with operations here also came out bruised.
Cabot Oil & Gas, the largest producer of natural gas in Pennsylvania, fell by 10 percent, closing at $22 per share.
Range Resources lost 7 percent, settling at $33.20 per share, while Antero Resources plunged 8 percent to $22.31.
Consol Energy Inc. and Rice Energy Inc. and Southwestern Energy Co. were down 7 percent, with Consol closing below $12 per share for the first time in more than a decade.
To some extent, natural gas stocks have been tainted by their correlation to crude oil and falling natural gas liquids prices, said Bloomberg Intelligence analyst Vincent Piazza.
“It’s all one murky soup,” he said.
Falling oil is also bad news for ethane, a natural gas liquid that competes with crude in cracker plants, Mr. Piazza said.
Ethane crackers, such as the multibillion-dollar Shell facility proposed for Beaver County, have an advantage when the price of ethane is significantly below the price of naphtha, an oil-based feedstock. Narrowing the spread stresses the economics of spending so much capital upfront for a benefit that would be marginal, if there at all.
More fundamentally, Mr. Piazza said that while oil and gas’s pain is often pinned on oversupply, a lack of demand is equally, if not more significant. A slight rebound earlier this year gave people a false sense of economic growth, he said. But that was just restocking.
Real growth “has to come from the developing world,” from places like China, he said. “That growth has slowed. This was very obvious, but the degree of that slowdown was unknown until now.”
