Analysts expect the oil demand to decline with rising cases of COVID-19 because countries may have to again restrict travel to contain the virus’ spread. As concerns over the oil industry recovery grow, we think energy stocks EQT Corporation (NYSE:EQT), Tellurian (NASDAQ:TELL), and Delek. (DK) possess bleak growth prospects and as such are best avoided now. Read on.Oil demand rose significantly in the first half of 2021 thanks to a fast-paced economic reopening. Rising demand and production cuts drove oil prices to their near two-and-a-half years’ highs.
However, the rapid spread of the COVID-19 Delta variant is now threatening to cool the oil demand. As several countries reinstate travel restrictions to curb the spread of the virus, oil demand will likely remain tepid in the near term. Meanwhile, earlier this month, OPEC+ closed a deal to increase oil supply gradually, aiming to fully phase out production cuts by around September 2022. So, with depressed demand and a supply glut, oil prices are expected to decline further in the coming months.
Given this backdrop, we believe fundamentally weak energy stocks EQT Corporation (EQT), Tellurian Inc. (TELL), and Delek US Holdings, Inc. (NYSE:DK) are best avoided now.