Energy Stock Short Sellers Took A $6.3B Loss In November As Oil Prices Rebounded

The Energy Select Sector SPDR Fund XLE has more than tripled the return of the S&P 500 over the past month as investors are piling into energy stocks in anticipation of an oil market rebound in 2021 and beyond.

With WTI crude oil prices now back above $44 for the first time since before the pandemic, S3 Partners analyst Ihor Dusaniwsky said energy stock short sellers took quite a beating in the past month. Energy stock short sellers endured $6.35 billion in net mark-to-market losses in November.

Energy sector short interest now totals $27.8 billion, and short sellers covered just $394 million of their aggregate positions during the month despite heavy losses. Dusaniwsky said the short selling data does not support the theory that energy stock gains in the past month have been driven by significant short covering.

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Most Shorted Energy Stocks: Here are the five energy stocks with the largest outstanding short positions, according to S3:

• Exxon Mobil Corporation XOM, $1.86 billion in short interest.
• ConocoPhillips COP, $1.35 billion in short interest.
• Chevron Corporation CVX, $1.16 billion in short interest.
• Marathon Petroleum Corp MPC, $1.14 billion in short interest.
• Halliburton Company HAL, $754 million in short interest.

Short sellers have been particularly aggressive in betting against ConocoPhillips in the last month. ConocoPhillips’ short interest increased by $330.3 million in November.

Dusaniwsky said energy stock short sellers had some home run trades in November led by Gulfport Energy Corporation GPOR, which netted short sellers a $6.8 million profit on the month. However, short sellers took November losses of $265.7 million on Chevron, $280,3 million on Exxon, $289.3 million on Marathon Petroleum and $346.6 million on ConocoPhillips.

“If the Energy sector continues to rally, we should see more short covering as shorts begin to realize their year-to-date profits and rotate into other more attractive sectors,” Dusaniwsky said.

Benzinga’s Take: Oil stock short sellers made a killing during the early stages of the pandemic when oil prices briefly crashed below $0 at one point. However, BP plc BP recently projected that global oil demand will not peak until at least 2030, so the companies that have survived the multiyear downturn could now be well-positioned for a long-term upswing in the next oil cycle.