Share Prices: Why are they lagging oil prices?

[dan_s]

The equity markets are on a "Roller Coaster". On March 2nd we saw the largest point increase for the Dow EVER. On March 3 the Fed cuts the interest rate in the morning and the market sells off, giving over half of the points back.

"Oil prices went up for a second day on Tuesday, as investors hoped the world’s biggest producers would cut output more to offset the economic impact of the coronavirus outbreak. Supporting prices further was an emergency half-percentage point interest rate cut by the Fed to offset the economic impact of the coronavirus outbreak. WTI and Brent crude has dropped nearly 20% from their January’s highs, highlighting the impact of the fast-spreading virus on fuel consumption. US crude rose as much as 1.2% to $47.32 a barrel while Brent added nearly 0.8% to $52.37 a barrel around 10:00 AM NY time." - Trading Economics

Here is what might be happening that caused E&P company share prices to decline Monday and Tuesday.
1. The big selloff last week generated a lot of "margin calls" that had to be covered on Monday and Tuesday.
2. The media is still spreading the FEAR of the new coronavirus (COVID-19). CNN and MSNBC are done if they don't have FEAR to draw in viewers. Johns Hopkins University (the website everyone is using to get the daily increases in cases and deaths) is reporting a steady decline in "active cases", but no one seems to notice.
3. Natural Resource hedge funds have had a ton of investors cash out, creating more sellers than buyers for even the grossly oversold upstream companies with strong balance sheets.
4. The Fed cut interest rates this morning, which should have been good for equities, but I heard some "experts" say the sudden move just reinforces the FEAR on Wall Street that the new virus will surely push the global economy into a prolonged recession.
5. There is a lot of confusion out there and Wall Street hates the uncertainty.

MY TAKE:
> IMO COVID-19 is following the same path as SARS and will be gone by this summer. Plus, its not more deadly than the seasonal flu. Clearly, the number of patients that have fully recovered without a vaccine shows it is not the "Angel of Death" the media is pushing. See this chart for how fast SARS came and disappeared: https://www.who.int/csr/sars/epicurve/e ... ndex1.html
> GAAP Accounting Rules add to the FEAR and confusion: Mark-to-Market adjustments on hedges and impairment charges mask how well some upstream companies did in Q4. Companies that booked big MTM losses in Q4 will be booking big MTM gains in Q1.
> The recent dip in oil prices all but guarantees that U.S. oil production will decline this year. We may need every drop of oil OPEC can export by Q4.
> OPEC+ should announce their official production cut tomorrow.