As the markets sold off on Thursday, gold, and silver were few of the only assets that remained in the green for the entire day. Thus, the notion that the precious metals will crash with the markets continues to be proven wrong. And what an ugly day it was as the Dow Jones fell 450 points at its low, while the Dollar, oil, and shale stocks were clobbered.
Of course, there was a late day rally that pushed the markets off their lows as the Dow Jones Index only closed down by 286 points. However, the real loser yesterday was oil and oil stocks, especially the shale oil stocks. As I mentioned in a previous article, THE BLOODBATH IN U.S. SHALE STOCKS CONTINUES: Worst Is Yet To Come, the shale stocks were severely underperforming the major oil companies since the peak in the oil market in October.
Unfortunately, the situation in the shale stocks went from BAD to WORSE. As the oil price fell 8% over the past two days, with the majority of the decline on Thursday, several shale stocks were decimated. The following chart shows the price performance between three major oil companies and three shale stocks:
As the oil price fell $1.50 on Wednesday and another $3.5 on Thursday, it impacted the shale stocks more negatively than the major oil companies. While BP, Chevron, and ExxonMobil’s share prices fell 2-3%, the shale stocks plummeted 9-16%. Continental Resources stock fell 9.5% over the two days, but the real losers were Oasis, down 13% and Whiting, dropping a stunning 16%.
It seems that the shale stocks that focus in the Bakken are much weaker than those in the Permian, like Pioneer and Concho. However, I believe the...