Shares of major energy companies including BP, Shell, and Chevron have extended their recent declines, with each stock falling more than 15% from their year-to-date peaks. The sell-off accelerated after Morgan Stanley slashed its crude oil price forecasts, citing an emerging global oversupply that could pressure profits across the sector.
Shell shares dropped to 2,900p on Monday, their lowest since February and 20% below the 2025 high. BP fell to 472p, down 22% from its peak, while TotalEnergies slipped to €68, a 15% decline from March highs. In the U.S., ExxonMobil and Chevron have each lost over 20% from their best levels this year. The FTSE 100 has also been impacted, with energy losses weighing on the index.
Morgan Stanley Warns of Lower Oil Prices
The rout in energy stocks follows a sharp drop in crude oil benchmarks. Brent crude fell to $70 per barrel on Tuesday, while West Texas Intermediate (WTI) slipped to $69. Prices resumed their decline after the U.S. and Iran reached a deal to halt recent strikes, allowing more tankers to transit the Strait of Hormuz and easing supply disruption fears.
In a research note, Morgan Stanley analysts warned that the market faces a significant glut. The bank now expects Brent to average $75 per barrel in the third and fourth quarters, down $15 and $5 from prior estimates, respectively. For 2026, the bank sees Brent averaging $70. Other major banks have also revised their outlooks: Goldman Sachs cut its Q4 forecast to $80, Citi sees $75, and JPMorgan projects $63 next year.
Technical and Fundamental Pressures Mount
Some analysts suggest that even these lowered estimates may be optimistic. Supply is expected to increase in coming months as OPEC+ unwinds production cuts, while demand growth shows signs of slowing. The combination could push prices toward $40 later this year, according to some bearish forecasts. The recent oil spike following U.S.-Iran tensions has quickly reversed, underscoring the fragile market sentiment.
Impact on Energy Company Profits
The sustained decline in oil prices is expected to weigh heavily on second-half earnings for integrated energy majors. While Q2 revenues may still benefit from elevated prices earlier in the quarter, the outlook for the remainder of the year has darkened. Shell reported Q1 profit of $6.92 billion but reduced its buyback program to $3 billion, partly due to its acquisition of ARC Resources. BP more than doubled its profit to $3.2 billion in Q1, while TotalEnergies increased its buyback by over $1.5 billion. In contrast, Chevron and ExxonMobil posted weaker quarterly results, with profits falling sharply.
Investors are now pricing in the likelihood that these companies will generate lower cash flows and may need to scale back shareholder returns if oil prices remain depressed. The Vodafone share surge highlights how sector-specific news can drive divergent moves, but for energy, the macro headwinds remain dominant.
As the market adjusts to a lower-for-longer oil price environment, energy stocks could face further downside in the weeks ahead. The combination of rising supply, moderating demand, and cautious Wall Street forecasts suggests that the recent correction may not yet be over.
This article is for informational purposes only and does not constitute financial advice.
