Short sellers are increasing their bets against energy stocks with the prospect of the ongoing decline in crude oil and other energy prices continuing into 2024.
Short interest in energy stocks increased 28 basis points from 3.43% at the end of October to 3.71% at the end of November, according to the latest data from S&P Global Market Intelligence. Communications services, which saw short interest jump 29 basis points, was the only other sector to see a bigger increase over that monthlong stretch.
At the end of November, short interest in energy stocks was at its highest level since October 2022 and up nearly 40 basis points since the beginning of this year. Through November, the S&P 500 energy sector has declined by 1.6%, while the overall large-cap index has risen by more than 12.5%. Brent crude oil prices fell about 12.5% from their peak in late September to the end of November.
Short interest measures the percentage of outstanding shares of a given company or industry held by short sellers, who seek to profit from a stock's decline by borrowing shares to sell at a high price, then repurchasing them after a drop and pocketing the difference.
Sector breakdown
Short interest increased in all the most-shorted energy subsectors, including in coal and consumable fuels, which jumped to 7.17% short interest at the end of November, a 213-basis-point increase from the end of October.
Short interest in oil and gas drilling stocks rose to 5.96% at the end of November from 5.86% at the end of the previous month.
Vertex Energy Inc., Vital Energy Inc., and Transocean Ltd. were the three most-shorted energy companies at the end of November, with short interest of 21.30%, 15.92%, and 15.04%, respectively.
Short interest in Vertex Energy, a specialty refiner and marketer, climbed as high as 31.72% in mid-February and fell as low as 14% in mid-June.
Most shorted
Across the whole US economy, consumer discretionary stocks remained the most-shorted stocks with 5.40% short interest, roughly flat from a month earlier.
Beyond Meat Inc. was the most-shorted stock at the end of November, with short interest of 42.14%.