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Data: FactSet; Chart: Axios Visuals

Investors have abandoned oil at warp speed so far this year as futures prices have fallen to record lows. Even as oil has bounced from its record trough in April, investors remain skeptical about the chances for sustained value appreciation.

Why it matters: "Typically, oil price fluctuations have a small aggregate impact on US growth, with roughly offsetting effects from the energy capex and consumption channels," Paul Choi, biotechnology analyst at Goldman Sachs, writes in a note to clients.

  • "However, the sharp rise in the likelihood of bankruptcies in the energy sector and spending constraints due to the virus suggest that the decline in oil prices might be a larger drag on growth this time."

The big picture: The U.S. is now the world's No.1 oil producer, which means more of the economy is dependent on oil and gas production.

What happened: Energy saw the biggest change in positioning of all market sectors, as traders sold nearly 80 million shares of energy stocks during the first quarter, Bank of America Global Research notes. That put energy's relative weight in overall fund holdings at its second-lowest level in the bank's data history, dating back to 2008.

  • Hedge funds sold oil at an even more extreme pace and held record underweights at the end of the first quarter.

What to watch: Oil's historically low prices mean that more bankruptcies are "likely unavoidable," Choi says. Goldman's estimates currently imply "a 50-60% year-on-year decline in energy capex in Q2/Q3, similar to the decline in 2015/2016."

  • In addition to the increased bankruptcies, that will likely also mean more debt and less investment for the companies that are able to survive, meaning sustained fundamental weakness in the sector.

The last word: Analysts expect oil will provide a net drag on overall U.S. GDP growth of roughly 0.25 percentage points, year over year, Choi says.

  • "While this would normally represent a meaningful drag on growth, in the current environment oil is unlikely to be a major factor for overall growth."

Go deeper: A world locked down and drowning in oil

Go deeper

Dion Rabouin, author of Markets
Aug 18, 2020 - Economy & Business

The American real estate conundrum

Reproduced from CivicScience; Chart: Axios Visuals

The housing market has been a solidly bright spot in the U.S. economy in recent months.

Yes, but: There remain serious questions about what the next phase for the market will be as the coronavirus pandemic has created an enormous amount of uncertainty about where and how people will live.

Updated 12 hours ago - Sports

The potential GOAT of chess faces intriguing challenger

Illustration: Sarah Grillo/Axios

The World Chess Championship between Norway's Magnus Carlsen and Russia's Ian Nepomniachtchi began on Friday, 1,094 days after Carlsen won his fourth consecutive title.

Why it matters: During the long, COVID-fueled layoff, chess entered a new era, and with the championship finally here, the age-old game is ready for its close-up.

Department of Interior proposes raising cost of drilling on public lands

A horizontal drilling rig and a pump jack sit on federal land in Lea County, New Mexico. Photo: Callaghan O'Hare/Bloomberg via Getty Images

Oil and gas companies should pay more to drill on federal lands and waters, the Department of the Interior argued in a report released Friday, saying that the current rates were "outdated."

Driving the news: The Department of Interior report said that the federal government's oil and gas leasing and permitting program "fails to provide a fair return to taxpayers, even before factoring in the resulting climate-related costs that must be borne by taxpayers."