The S&P 500 Energy Sector Index declined by 8.7 points, or 1.6%, Monday on expected increases in supply and questions about OPEC's waning importance and ability to dictate price by controlling production.
"Crude oil is the main driver as there will be more supply coming into the market, and it is evident that OPEC has lost its controlling power and the biggest uncertainty is in the Middle East, particularly the relationships between Saudi Arabia and Russia, and the Iranian sanctions," says Eliecer Palacios, managing partner of PetroRock Energy LLC in an interview with Real Money. "There is no reason to own energy stocks right now as the sector has fallen into a 'value trap': there is no catalyst, no growth."
Palacios notes the stocks are owned primarily by institutions, particularly speculators.
Brent crude oil prices, which have been hovering at the highest level in three years, retreated to $77.36 per barrel on Monday and WTI crude price fell to $74.06 per barrel.
Still, there is money to be made if you're strategic.
"The only thing worth putting money into in the U.S. today is in oil & gas companies active in the Permian Basin: Pioneer Natural Resources (PXD) , Parsley Energy (PE) , Concho Resources (CXO) . These are unique companies that are well-positioned and have the balance sheets to weather the storm in commodity prices. Other companies worth looking at are those involved in the LNG export market: Cheniere Energy (LNG) , Tellurian (TELL) , which are positioned to benefit from the price differentials in the global markets and the strong Asian demand for LNG," Palacios says.
Pioneer Natural Resources stock fell just over $4 on Monday to $185.21 per share, Parsley Energy declined 35 cents to $29.93, and Concho Resources was down $2.96 to $135.39.
-- By Martin Cassidy
