Crude oil prices may be back on the skids

Just when it looked like crude oil prices found their footing, they’re slipping. Energy stock investors are wise to be well-positioned to survive the tumble.

The price of a barrel of oil dropped below $40 again Tuesday, based on WTI crude, falling below that level for the first time in more than three months. It’s  an unexpected turn of events for investors who had seen oil prices, and oil stocks, rally this year.

WTI crude prices enjoyed a 32% rally this year, up until a June peak.

But now the trade is going the other way, so investors need to be prepared. The way energy stocks reacted to the implosion of oil prices in previous years, including in 2014, can serve as a guide. Remember that during 2014 oil prices dropped around 40%.

To help energy investors come up with a game plan, S&P Global Market Intelligence grouped all past oil price drops as 5% “moderate” declines and 10% or greater “extreme” declines.

The analysis examined oil price changes between July 1989 and the end of 2014.