Prices are coming back but companies are cutting
With oil prices up nearly 50% this year, you would think jobs in the energy industry would be safe. Not so. Today shale driller Pioneer Natural Resources started laying off workers, with reports saying as many as 300 jobs were cut.
When you look at the chart of the company it makes more sense.
Shares are up just 16% this year despite the jump in oil.
I'm illustrating this because it's a recurring theme right now. The price of oil company stocks haven't even come close to reflecting the rebound in oil prices this year. It's a head-scratcher for analysts in the industry.
In theory, they should be roaring. Not only is oil the best-performing asset of any kind this year, but interest rates are also down so oil companies -- which are often highly levered -- should rebound on that as well. Instead you even have some companies that are down year-to-date.
What's especially important here is the second part of Pioneer's announcement. They are going to refocus only on the Permian basin, which is their lowest-cost production.
This is also happening all over. Companies are cutting spending, cutting investment, cutting jobs and paying down debt rather than investing. The EIA forecasts US oil production will rise to 13 million barrels per day next year but investment trends are showing the opposite.
It could end in a mismatch that leaves the global economy under-supplied next year, especially if OPEC continues to keep the pressure on.
