This has been an odd day in the stock market, with interest returning to high-growth and otherwise speculative plays. With that in mind, many investors may simply be wondering why oil stocks are down today.
That’s a rather complicated question to tackle. However, there are a few factors at play driving the broader energy sector down today. The iShares U.S. Energy ETF (NYSEARCA:IYE) is down nearly 4% at the time of writing, reflecting this sentiment.
Let’s dive into some of the factors dragging down oil today.
Why Are Oil Stocks Down Today?
Okay, let’s start with the political landscape first. Most investors know President Joe Biden has been antagonistic toward the energy sector of late. A series of pipeline permit cancellations and a heavy focus on investing in clean energy instead have laid the groundwork for what Biden hopes will be a long-term infrastructure revitalization.
In recent days, he was reportedly looking at ways to slow down oil and gas drilling. This move follows “a court decision [that] ended his freeze on federal drilling auctions.” Whether or not Biden is successful in limiting or blocking new drilling leases remains to be seen. However, his apparent inclination to do so isn’t bullish for energy stocks.
Additionally, it was reported today that a major Chinese port is seeing a bottleneck take place. The Yantian Port authority noted that a six-day stop on export containers due to a Covid-19 outbreak has caused some significant congestion at this port.
However, as we saw with the recent Suez Canal blockage, oil prices rose on this news. And some analysts remain bullish on oil, citing $100 price targets for oil on heavy demand coming out of this pandemic. Additionally, other famous investors such as David Tepper have put their support behind energy stocks.
For those who believe the best time to buy stocks is when they’re beaten up, this makes sense. However, energy stocks have recovered nicely from pandemic lows. Accordingly, how much of this post-pandemic surge is already priced in remains the question.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
