The energy sector plummeted to the bottom of S&P 500 indexes in July, snapping its six-month winning streak as OPEC's decision to boost oil production and the resurgence of COVID-19 cases in the U.S. threaten to disrupt economic recovery.
The S&P 500 Energy slumped 8.3%, the worst performer of the S&P 500 key sectors in July. Meanwhile, S&P 500 Utilities saw an increase of 4.3%, outpacing the broader S&P 500 index which gained 2.4%
On July 19, major energy stocks and indexes were battered. "It's the worst day for energy since last September," Mizuho Securities USA LLC's executive director for energy futures, Robert Yawger, said. "OPEC blew the call," with the announcement of 400,000 barrels per day of additional production headed to the markets.
"The more problematic issue for the oil market is the spread of the delta variant," Raymond James & Associates oil, gas and renewables analyst Pavel Molchanov said in a July 19 email. "It is an underappreciated fact that the number of people in lockdown around the world is higher today than it was in January!"
Among components, Diamondback Energy Inc. was the biggest decliner in July with shares shrinking 17.9%, followed by Occidental Petroleum Corp. and Marathon Oil Corp. whose shares tanked 16.5% and 14.9% respectively.
Phillips 66 saw its shares slip 14.4%. The company reached a deal with Linden Cogen Holdings LLC to blend hydrogen-containing fuel gas from Phillips 66's Bayway refinery with natural gas to fuel a 172-MW unit gas turbine at a thermal cogeneration plant in New Jersey.
Valero Energy Corp. dropped 14.2%. The company on July 15 reported an operational disruption that led to above-normal gas emissions at its refinery in Corpus Christi, Texas.
The utility sector was the third best-performing S&P 500 index during the month. American Water Works Co. Inc. saw the biggest gain with 10.4% total return, followed by Evergy Inc. with an increase of 7.9%
Eversource Energy saw a total return of 7.5% in July. Company executives confirmed that the 704-MW Revolution Wind Offshore project is expected to reach commercial operations in 2025 after previous guidance that the project would be unlikely to come online by the end of 2023, meaning three of the company's offshore wind projects, totaling more than 1.7 GW, are to startup between 2023 and 2025.
Duke Energy Corp., which recorded a positive return of 6.5%, declared that it surpassed 10 GW of wind and solar energy, with the company looking ahead to reaching 16 GW by 2025 and 47 GW by 2050.
In an interview with S&P Global Market Intelligence, Duke Energy Executive Vice President and CFO Steven Young defended the company's investment decisions and leadership direction against an activist investor waging a campaign to highlight an "erosion of value" at one of the nation's top utilities.
NextEra Energy Inc. was up 6.3% in July. The company is looking to capitalize on its scale to pick up new business as smaller competitors struggle to cope with rising costs and supply-chain disruptions.
On the flip side, AES Corp. saw a negative return of 8.5%. The company signed an agreement with the Chilean government allowing for the closure of 1,097 MW of coal generation as soon as 2025. It is the single largest coal retirement announcement by any power company in Chile to date and includes roughly 20% of the country's installed coal capacity.
California utility Edison International posted a negative return of 4.6%.
While its Northern California counterpart Pacific Gas and Electric Co. has pivoted to an envisioned massive, multibillion-dollar effort to bury 10,000 miles of overhead distribution lines to keep its infrastructure from igniting wildfires, Southern California Edison Co., or SCE, is betting on covered conductors.
But the Edison International utility subsidiary is frustrated with the California Public Utilities Commission's proposed $1.86 billion, or 54%, cut to its multiyear plan for installing covered wires. SCE also rolled out a $436 million electric vehicle charging program to pave the way for the deeper integration of the transportation and power sectors.