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Energy sector equities: running on empty?

One of the surprises of 2017 was the relatively poor performance of stocks making up the energy sector of the MSCI World developed market equity index.

The sector gained just 4.2% last year, compared to the 23.1% advance for the broader index.

This shortfall is surprising as the principal driver of returns for energy sector stocks – crude oil prices – ended the year up by more than 20%.

The fall in oil prices during the first six months of 2017 was matched by a lesser drop in the value of equities in the energy sector. By the end of June, Brent crude oil prices had fallen by nearly 20%, while the sector eventually declined by 62% of that, or 12%.

The subsequent rebound in prices was not matched by a commensurate rally in shares, however. By the end of the year, Brent oil had gained over 50% (and has continued to rise in 2018), while the MSCI World IMI Energy index (which includes large, mid, and small-cap stocks) had advanced by less than 20%.

To understand better the reasons why energy sector equities have been underperforming – and how they are likely to fare in 2018 – read our expert analysis here. 

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