There is a noticeable recent shift in the direction that major oil and gas companies are taking their businesses and that can hardly be a surprise when you consider the shockwaves caused by the pandemic that sent oil prices into negative territory.
As that was the first time it had happened, you could describe it as a watershed moment and a wake-up call for the industry to adjust its business model beyond to a greener outlook.
Long Term Move From Fossil Fuels?
Everyone knows that oil and gas companies are going to have to shift their focus in order to align with green targets and a permanent move away from fossil fuels.
Of interest to traders however, is whether to call a decline in oil demand a longer-term trend or simply a short-term reaction to slower demand as a result of economies shutting down as a result of the pandemic.
You might recall that even BP called the peak in oil demand back in 2019.
Though considering oil and gas will remain a dominant source of energy for at least another 30 years, you could hardly say that the oil and gas behemoths need to urgently source new ways of generating income.
However, If investors took a similar hostile view about the oil and gas giants as they did when tobacco stocks fell out of favour, it could play out in a similar way in this sector.
Investors Seek Alternatives
The European Investment Bank has already stated that coal, oil and gas projects won’t be funded from the end of 2021 and investors are showing signs of getting picky about polluting stocks.
You only have to take a look at the price-to-book ratios of the “big five” oil companies to see a downward trend in ratings that has picked up pace over the last three years.
The oil and gas sector offers a lot of potential trading opportunities when you consider the fairly seismic changes that are going on as the big players set their businesses on a different and greener course.
Whether it is fluctuations in the crude oil price or trading individual stocks as the big players adjust to a shift in emphasis on sustainability, it is a sector that should present plenty of opportunities.