A worldwide oversupply of oil is causing prices and related stocks to decline.
Reconsider Your Energy Investments
If your investment portfolio leans heavily toward energy, or if you’re considering investing more in energy stocks, now may not be the best time.
The Impact of a Global Oil Glut
The primary reason to avoid energy stocks as you approach the new year is the increasing global oil surplus. Currently, there are 1.4 billion barrels of oil being transported or stored, a 24% increase compared to the average data from 2016 to 2024.
Current Oil Prices
This surplus has significantly lowered oil prices. West Texas Intermediate is trading at approximately $57 per barrel, which is a $15 drop since the start of the year. Meanwhile, Brent Crude, used as a global benchmark, is now around $60 per barrel, also $15 lower than it was at the beginning of 2025. Consequently, the average price of gasoline in the U.S. has dipped below $2.90, the lowest it’s been since the COVID-19 pandemic.
Decline in Energy Stocks
Falling oil and gasoline prices have started to adversely affect energy stocks. Recently, Chevron’s share price has fallen 9% since early September. Other companies like ExxonMobil have also seen declines, although they’ve performed somewhat better than their counterparts.
Future Prospects for Oil Supply
Analysts predict that the oversupply will persist into 2026, with the International Energy Agency estimating that supply will exceed demand by over 3.8 million barrels a day next year, representing a historical imbalance. The U.S. Energy Information Administration also indicates that increasing inventories will likely keep prices low.
Job Cuts in the Oil Sector
In anticipation of these issues, major oil companies are making workforce reductions. For instance, Exxon recently announced the elimination of 2,000 jobs as part of a restructuring effort. Other firms, such as ConocoPhillips and Chevron, have also initiated layoffs as they brace for continued challenges.
Uncertain Influential Factors
It’s important to note that oil prices are not solely driven by supply and demand; geopolitical factors also play a significant role. Escalating tensions between the West and Russia could cause prices to rise, while resolutions could result in even lower prices. In the interim, it appears grim for oil stocks as the situation unfolds.
