With upstream and downstream energy stocks tied in part to crude oil prices, many are following the price of the commodity lower

December 08, 2023 | 10:36am

These energy stocks are getting close to a feared ‘death cross’ as crude oil tumbles

With upstream and downstream energy stocks tied in part to crude oil prices, many are following the price of the commodity lower

Several large oil and gas companies are close to sending bearish signals to investors in the form of the dreaded " death cross " trading pattern. A stock price makes a death cross when its 50-day moving average falls below the 200-day moving average. At the least, that means a stock is losing momentum and, at the worst, suggests further losses may be in store. With so many upstream (exploration and production) and downstream (refining and marketing) energy stocks tied to commodity prices, the group has suffered lately as the benchmark Texas crude oil has tumbled below $70 a barrel — a six-month low. Oil has come down in reaction to weakening demand in China, record production in the U.S. and skepticism over promised OPEC+ production cutbacks. Exxon and Chevron , the two largest U.S. oil producers, already formed the death cross back in November, weeks after entering deals to buy Pioneer Natural Resources and Hess , respectively. Exxon is down about 11% this year, while Chevron is off 21%, as of Thursday's close. Oilfield service provider Schlumberger appears to be heading toward a death cross. Still, virtually every analyst who covers SLB gives it a buy rating, according to FactSet. Occidental Petroleum is very close to entering the death cross. The company has a $49.7 billion market cap and Warren Buffett's Berkshire Hathaway holds a 26% stake. The Wall Street Journal last week reported that Occidental is in talks to buy privately held producer CrownRock for more than $10 billion. The last time Occidental made a major acquisition, buying Anadarko Petroleum for $55 billion in 2019, the company was saddled with debt and fought a bitter board battle with activist investor Carl Icahn, who ultimately sold his stake. APA Corporation is also precariously close to forming a death cross. The midsize energy company formerly known as Apache has a $10.4 billion market cap as well as oil and natural gas operations in the Permian Basin in the U.S., Egypt and the U.K. Analysts are divided on APA's stock, with 50% positive on the stock and rating it a buy or an equivalent, 40% call it a hold and 10% at sell or are underweight. Talos Energy is on a razor's edge and could fall into a death cross any day, but analysts remain upbeat on the stock. Some 78% analysts covering the stock recommend it as a buy, while 22% have a hold. Vital Energy has already formed the death cross. However, most analysts are also positive on Vital right now, with 64% rating the stock a buy or overweight, 21% have a hold and 14% a sell.

This story originally appeared on: CNBC - Author:Spencer Kimball