Energy stocks and crude oil prices alike collapsed Wednesday as investors digested new concerns about falling demand amid an increasingly shaky macroeconomic environment, though the slide came with a silver lining for American consumers.
Prices at the pump may subside as crude prices come back down.
International oil benchmark Brent crude tanked 5.1% to $86.26, falling to its lowest price since August 30, while domestic benchmark West Texas Intermediate also fell 5%.
The slide came after JPMorgan strategists warned “demand destruction” has begun for the commodity globally and the Energy Information Administration revealed U.S. demand for gasoline declined 5% year-over-year during the four-week period ending Friday.
Energy stocks, which enjoyed a strong September as crude prices surged, tanked Wednesday amid a broader market rally due to concerns about what lower inputs will mean for profits.
The XLE exchange-traded fund tracking S&P 500 energy stocks fell some 3.2% in Wednesday trading to its lowest close since July 28.
A staggering 14 of the S&P’s 15 worst performers Wednesday were energy stocks, according to FactSet data.
$3.74. That’s the average price per gallon of gas in the U.S., according to GasBuddy, hitting its lowest level in two months. Those hoping for gas prices, a key input for inflation, to come down further will likely receive further welcome news in coming weeks as lower oil prices make their way to the pump.
Oil prices and energy stocks both surged in 2022 as the industry enjoyed record profits due in part to instability associated with Russia’s invasion of Ukraine. After declining more than 10%, crude prices began creeping back up this summer, hitting their highest level of 2023 last month. Brent and WTI are both up significantly year-to-date even after Wednesday’s slump.
Energy’s sister utilities sector continued its cold spell Wednesday, registering another day of stock losses. Utilities are by far the worst-performing of the S&P’s 11 sectors this year, shedding 21%.