Data as of October 31, 2020 unless otherwise noted.
Performance (total returns)
| Benchmarks | October 2020 | YTD |
| Alerian MLP Index (AMZX) | 4.38% | -43.80% |
| Alerian Midstream Energy Select Index (AMEIX) | 0.14% | -36.70% |
| ICE BofAML U.S. High Yield Energy Index (HY Energy) | -0.23% | -17.82% |
| S&P 500 Energy Index (S&P Energy) | -4.41% | -50.38% |
Performance data quoted represents past performance and is no guarantee of future results. An investment cannot be made directly in an index.
Markets take a pause: The S&P 500 fell for the second consecutive month after five straight gains as markets digested rising global COVID-19 cases, a lack of fiscal stimulus in the U.S., and the U.S. presidential election. S&P Energy was the second-worst performer in the index, declining -4.41% as the pandemic continues to threaten energy demand. Midstream indexes outperformed during October as U.S. crude production rose to its highest level since early June. HY Energy was generally flat along with the broader credit markets. Crude prices declined by $4.43/bbl, or 11%, for the month, the market’s worst month since March. Rising COVID-19 cases in the U.S. and Europe have tempered sentiment around an already-fragile demand recovery, potentially putting the onus on OPEC and its allies to address supply again. The WilderHill Clean Energy Index rose for the seventh consecutive month, bringing its YTD return to 86.42%.1
Pandemic pushes oil below $40: Since mid-June, oil prices have remained incredibly rangebound as supply cuts by OPEC+ stabilized the market, but the recovery in energy demand was not robust enough to push prices higher. Between June 11 and October 23, the price of WTI crude never went higher than $43.39/bbl or lower than $36.26/bbl, and trailing 60-day crude volatility hit an all-time low in early September.1 However, prices fell below that range to end October as the pandemic worsened across multiple regions and caused renewed lockdown measures in some places. Even absent widespread restrictions in the U.S., a new wave of the pandemic is likely to hamper the recovery in energy demand as people limit their activity out of fear of contracting the virus. Gasoline demand in the U.S. has declined over the past two months, though part of that is seasonal due to the end of the summer driving season. Meanwhile, air travel remains well below pre-pandemic levels.2 Ultimately, we believe a full recovery in oil prices is unlikely without the return of demand, which appears to be under stress as the world deals with another wave in the COVID-19 pandemic.
Key takeaway
- Equity markets declined for the second straight month amid the ongoing pandemic and lack of U.S. fiscal stimulus.
- A new surge in coronavirus cases has put a damper on the energy demand recovery.
