Why Energy Stocks Tumbled on Monday

Energy stocks in the oil and gas sector continued to drop on Dec. 20, as the Omicron variant spread across Europe and the United States over the weekend.

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Energy stocks continued to drop on the S&P/TSX Composite Index, adding to the increasing turmoil left in the wake of Omicron variant surges. Oil prices dropped about US$5 per barrel in early morning trading, combined with even more losses the night before.

What happened?

The weekend wasn’t full of great news, as the Omicron variant of COVID-19 continued to stretch across Europe and the United States. In Canada, several announcements to curb the spread include restrictions not seen since September.

Investors remained worried that the spread could hit the demand for fuel. Many hoped the spread could be put under control, but the cases continue to grow higher and higher. Even as vaccine companies announce their booster may indeed protect against the new variant.

The announcements led to heavy losses for some companies. This included Westshore Terminal Investment (TSX:WTE) Frontera Energy (TSX:FEC), and UR-Energy (TSX:URE) dropping 10% and STEP Energy (TSX:STEP) down 12%.

So what?

These are companies you may want to avoid in the future, as, unfortunately, energy stocks don’t look to be improving anytime soon. Pessimism remains across financial markets, not just in Canada, as the variant spreads. In fact, it also led to one U.S. Senator opposing President Joe Biden’s US$2 trillion infrastructure package over the uncertainty surrounding Omicron.

Much of that infrastructure was aimed at energy stocks, and there are likely to be even less deliveries in January as the virus spreads. And these energy companies, unfortunately, are only likely to see their share price and production decline even further.

Now what?

It’s probably best to stay away from energy stocks in general these days. True, these have been a safe haven in times of turbulence. In fact, when oil prices were down, it used to be that you’d want to pick up these companies in bulk!

Today, that’s no longer the case. The virus continues to stress out energy stocks, but it’s more than that. Now, the world is turning towards new revenue streams through clean energy production. And that simply won’t be these few companies with share prices down.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends WESTSHORE TERMINALS INVESTMENT CORP.

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