• 5 minutes Covid-19 logarithmic growth
  • 8 minutes Why Trump Is Right to Re-Open the Economy
  • 12 minutes Charts of COVID-19 Fatality Rate by Age and Sex
  • 14 minutes China Takes Axe To Alternative Energy Funding, Slashing Subsidies For Solar And Wind
  • 29 mins The Most Annoying Person You Have Encountered During Lockdown
  • 1 min Which producers will shut in first?
  • 5 hours TRUMP pushing Hydroxychloroquine + Zpak therapy forward despite FDA conservative approach. As he reasons, "What have we got to lose ?"
  • 13 hours Saudi Aramco struggling to raise money for this year's dividend of $75 billion. Now trying to sell their pipelines for $10 billion.
  • 10 hours Real Death Toll In CCP Virus May Be 12X Official Toll
  • 5 hours How to Create a Pandemic
  • 22 hours WE have a suicidal player in the energy industry
  • 4 hours Breaking News - Strategic Strikes on Chinese Troll Farms
  • 11 hours A New Solar-Panel Plant Could Have Capacity to Meet Half of Global Demand
  • 13 hours Death Match: Climate Change vs. Coronavirus
  • 6 hours Where's the storage?
  • 9 hours KSA taking Missiles from ?
Martin Tillier

Martin Tillier

More Info

Premium Content

The Implications Of Falling Interest Rates For Energy Investors

Inversion is back in the news. Treasury yields have been falling dramatically over the last week or so, with yield on the 10-Year Treasury Note falling to below 2.2% for the first time since the middle of 2017. Given that the Fed has raised short-term rates significantly since then, that has resulted in longer-term yields falling below those on short-term debt, giving an inverted yield curve. That is typically taken as a sign of upcoming economic weakness in the U.S. and even of an impending recession, but what does it mean for energy investors?

(Click to enlarge)

The most obvious implications are bad. If the market is correct and we are heading towards recession in the U.S., that would have a significant effect on oil demand, pushing prices ever lower. That, in turn, will add to the downward pressure on oil stocks and energy stocks in general.

Nor is the broader picture looking good for oil prices. Yesterday’s tweet from President Trump announcing tariffs on Mexico has reinforced the view that he believes in the power of tariffs to advance a multitude of policy positions, even those not directly related to trade and economics. For a commodity such as oil, where global growth expectations play such an important role in pricing, that is a very bearish sign and will add to the pressure on energy stocks.

Even as all that happens, though, the very low yields on Treasuries and other fixed income securities may well put a floor on stocks of integrated,…






Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News