Dec 14, 2014 9:36 a.m. ET
NEW YORK (MarketWatch)—Talk about an oil spill. The spectacular unhinging of crude oil prices over the past six months is weighing mightily on the U.S. stock market.
And while it may be too early to abandon all hope that the market will stage a year-end Santa rally, it appears that if Father Christmas comes, there’s a good chance his sleigh will be driven by polar bears, instead of gift-laden reindeer.
Wall Street’s gift: a major stock correction.
Indeed, the Dow Jones Industrial Average DJIA, -1.79% already endured a bludgeoning, registering its second-worst weekly loss in 2014, shedding 570 points, or 3.2%, on Friday. That’s just shy of the 579 points that the Dow lost during the week ending Jan. 24, earlier this year. It’s also the second worst week for the S&P 500 this year SPX, -1.62% which was down about 58 points, over the past five trading days, or 2.83%, compared to a cumulative weekly loss of 61.7 points, or 3.14%, during the week concluding Oct. 10.
But all that carnage is nothing compared to what may be in store for the oil sector as crude oil tumbles to new gut-wrenching lows on an almost daily basis. On the New York Mercantile exchange light, sweet crude oil for January delivery settled at $57.81 on Friday, its lowest settlement since May 15, 2009.
Moreover, the largest energy exchange traded fund, the energy SPDR XLE, -1.86% is off by 14% over the past month and has lost a quarter of its value since mid-June.
The real damage, however, is yet to come. By some estimates the wreckage, particularly for the oil-services companies, may add up to a stunning $1.6 trillion annual loss, at oil’s current $57 low, predicts Eric Lascelles, RBC Global Asset Management chief economist.
Since it’s a zero-sum game, that translates into a big windfall for everyone else outside of oil players.
In his calculation, Lascelles includes the cumulative decline in oil prices since July and current supply estimates of 93 million barrels a day. It’s a fairly simplistic tally, but it gets the point across that the energy sector is facing a serious oil leak. Here’s a look at a graphic illustrating the zero-sum, wealth redistribution playing out as oil craters: Source and more
These Are The Companies That Will Make A Killing Off Of The Coming ‘Industrial Revolution’ In America
Last week, Citi analysts argued that technological breakthroughs—particularly in shale oil extraction—that will allow energy companies to exploit petroleum resources that were formerly inaccessible could spark an “industrial revolution” across the North American continent.
A follow-up report from Citi’s equities team highlights the companies that are already in position to take advantage of this energy boom. While analysts argue that the effect of an energy boom would be transformative and extend far beyond the oil industry, these are the companies that will be directly and locally impacted by the technological breakthroughs in resource extraction.
Read more: BI
- The US Energy Industry Is Going To Grow So Fast, It Will Spark A New ‘Industrial Revolution’ (tarpon.wordpress.com)