When I published “Oil Stocks Should Continue To Be Avoided” on SeekingAlpha.com (March 6th) I was surprised by this comment from a reader:

XOM hasn’t cut their dividend for 37 years. CVX hasn’t cut their dividend for 32 years. This latest supply/demand issue isn’t going to break these companies or cause them to drop their divvies. The stock price drop in major oil is a fabulous gift.

Of course, the prices of the energy giants’ shares did continue to plummet, but as far as I know, the majors mentioned haven’t yet cut their dividends, but many more junior companies have done so; and now the first global energy player has caved.

“In this extraordinary situation, we have decided to reduce the cash dividend for the first quarter 2020 by 67% [to $0.09],” Norway’s Equinor (NYSE:EQNR) said in a statement. While most oil majors have already slashed investments and buybacks, the latest could be a signal of what’s to come from others in the industry, including Royal Dutch Shell (RDS.A, RDS.B), BP (NYSE:BP), Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX), Total (NYSE:TOT) and ConocoPhillips (NYSE:COP). (source: seekingalpha.com)

The U.S. Energy Information Administration (EIA) just came out with their weekly update on the demand for oil.  The EIA estimates the decline in petroleum product demand by examining the changes in total product supplied, EIA’s proxy for consumption. This chart shows just how bad the impact of COVID-19 has been and will be:

petroleum demand Apr 23 2020

The good news is the price of gasoline is cheap (and beating down inflation); the bad news is we’re not going anywhere to reap the great savings.

About the Author

Malvin Spooner is a veteran money manager, former CEO of award-winning investment fund management boutique he founded. He authored A Maverick Investor's Guidebook which blends his experience touring across the heartland in the United States with valuable investing tips and stories. He has been quoted and published for many years in business journals, newspapers and has been featured on many television programs over his career. An avid motorcycle enthusiast, and known across Canada as a part-time musician performing rock ‘n’ roll for charity, Mal is known for his candour and non-traditional (‘maverick’) thinking when discussing financial markets. His previous book published by Insomniac Press — Resources Rock: How to Invest in the Next Global Boom in Natural Resources which he authored with Pamela Clark — predicted the resources boom back in early 2004.

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