This post was originally published on this site
Oil stocks are in ‘the death knell phase… You’re seeing divestiture by a lot of different funds. It’s going to be a parade. It’s going to be a parade that says, ‘Look, these [stocks] are tobacco and we’re not going to own them.’”
That’s CNBC’s Jim Cramer talking about what he considers to be a fundamental crumbling for the fossil-fuel industry following what many characterized as mixed earnings reports from Big Oil names Friday.
For Cramer, who appeared on the Squawk Box program, assessing Chevron CVX, -3.82% and Exxon Mobil XOM, -4.12% stocks for buying opportunities is a non-starter because of the inclination of money managers to avoid the sector as solutions for slowing man-made climate change strengthen through the public and private sectors. The U.S. has started the process to leave the Paris climate pact, but that has not stopped select industry from advancing their own efforts, including Amazon.com AMZN, +7.38% .
This sentiment shift, which Cramer says is not fleeting, is keeping him away from the stocks. He compares the situation to the upending of consumer habits and regulations that changed the tobacco companies forever.
“Look at BP BP, -2.43% ; it’s a solid yield, very good. Look at Chevron; they’re buying back $5 billion worth of stock. Nobody cares,” Cramer said. “This has to do with new kinds of money managers who frankly just want to appease younger people.”
One such money manager is the influential Larry Fink of BlackRock BLK, -2.29% who in his popularly followed annual letter declared sustainable investing “on the edge of a fundamental reshaping of finance.”
“In the near future — and sooner than most anticipate — there will be a significant reallocation of capital” driven by climate factors, said Fink, the founder of the firm that now manages nearly $7 trillion in assets, earlier this year.
Related: BlackRock’s Fink pressed to take action over words in dumping fossil fuels
Shares of Exxon and Chevron dropped Friday after both energy companies reported mixed quarterly results and Wall Street remained concerned about diminishing oil demand. Projections from energy companies show demand for oil could peak and fall in the coming decades; some outside reports suggest demand for oil could flatten as soon as 2025.
The energy sector the worst performing in the S&P 500 index SPX, -1.77% . Oil futures prices CL00, -0.98% were on track for their worst month since May, dropping in part on fears of a global downturn tied to the coronavirus outbreak.
Read: ‘Hurricane-force headwinds’ pull oil lower, but the losses aren’t built to last
Exxon Mobil late last year won a court case that said it was not responsible for misleading investors on the risk from climate-change regulations.
More Key Words:
CNBC’s Jim Cramer: Here comes the panic, but don’t rush to buy the dip
Hear it: Elon Musk drops surprise song dubbed ‘Don’t Doubt ur Vibe’
‘No Chinese allowed’: Racism and fear are now spreading along with the coronavirus
