Another big quarter for cash-filled oil giants

Jan. 2022: “The Energy Sector is the only sector up this year.”

**Ten months later: “**The Energy Sector is still the only sector up for the year.”

The S&P 500 Energy Sector is up 61% while the S&P 500 is down 20% — and no other sector is coming close. Energy stocks closely follow oil prices — which have come down slightly from this year’s peak but remain at elevated levels.

This has led to massive earnings gains for oil giants. This week, Shell (NYSE:SHEL) reported earnings that doubled from the same period last year. Exxon is also expected to report similar results today.

• Earlier this year, Biden told oil companies: “You should not be using your profits to buy back stock or for dividends.”
• And what are they doing? Exactly that. Instead of investing in new production, oil companies are using earnings to pay investors.

Investors want their cash out now…

In August, ConocoPhillips (NYSE:COP) announced a special dividend nearly three times the size of their regular dividend — on top of the regular dividend. Other companies have also announced such one-time dividends.

**Bets against the industry are growing. **Short sellers are holding 3.9% of US energy shares to bet against the market (as of Oct. 17). This is the highest level since 2020 and nearly double the average of the short interest across the S&P 500.

The fear for oil investors: A recession that’ll lower oil demand and, hence, prices.