In the light of yesterday's oil price crash, Rebecca Chesworth, Vice President and Senior Equities Strategist at SPDR ETFs, has shared the following thoughts on events.

Oil price crash – what happened?

Russia's decision to pull out of the OPEC+ agreement triggered an initial price decline but this has been further exacerbated by Saudi Arabia's decision to discount prices deeply and to increase output.

Brent crude oil price fell from $46 at close on Friday to $36 currently ($31 at low point Monday morning) – the largest absolute one-day decline ever.

Russian companies have long argued that Saudi/Russian co-operation has come at the price of market share for both countries, with a permanent loss to US shale. Their answer is a period of sustained lower prices that can permanently reduce US production levels.

Meanwhile, Saudi Arabia's decision to discount prices deeply and to increase output is aimed largely at Russia, with the aim of bringing them back to the table and resuscitating OPEC+.

Sector implications include:

Energy sector will likely undergo a massive adjustment and financial flows can exacerbate the current price situation significantly.

E&P earnings forecasts were assuming much higher oil prices, so expect significant downgrades. Largest falls yesterday in oil & gas E&P companies, for example Pioneer & Marathon Oil, oil & gas equipment suppliers, for example Haliburton & Schlumberger.

Economic benefit to China (as significant oil importer), acting as stimulus at a difficult time...this could help the following sector where China is also a significant importer.

Mixed impact on materials - chemicals companies with pricing power could benefit as their contracts mean there is no necessity to pass on raw material gains, but there is likely to be some destocking and lower demand...Copper price had held up well but price weak yesterday as transportation remains disrupted and stockpiles grow.

Negative impact on financials – banks with exposure to E&P companies & large oil-exporting countries could see increase in loan delinquency rate. Expect millions of dollars of provisions against oil-related exposures; good news is no signs of financial stress at banks yet.

This is spurring on momentum – relative sector performance yesterday is similar to that experienced since the start of the virus crisis.

Does the reaction make sense?

The size of yesterday's reaction seems extreme but relative performance between sectors is broadly in line with oil price sensitivity as measured over the last three years.

Given the relatively low reaction yesterday, healthcare is looking most interesting as a defensive sector, especially as the most disruptive forces have been taken out of the Democratic candidate race and we expect billions of extra dollars spending on healthcare services worldwide.

Sector performance last week

Period shows response by sector when there was some relief in the market last week: S&P 500 +0.6%, MSCI World +0.4% (albeit MSCI Europe -2.2%).

Utilities – best performer since the start of the virus crisis, strength across the board (no big single stock attribution).

Consumer staples – biggest gains from Kroger (operates supermarkets & convenience stores in US), falls from food and beverage suppliers such as Anheuser-Busch after downgrades.

European real estate – notable performance versus US Real Estate, supported by good yield.

Energy – most stocks lower again, US & World sectors have shown greater sensitivity to oil price action since start of year because of higher proportion of E&P activities.

Financials – weakness in all industry groups (banking, insurance, financial services).

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In the light of yesterday's oil price crash, Rebecca Chesworth, Vice President and Senior Equities Strategist at SPDR ETFs, has shared the following thoughts on events.

Oil price crash – what happened?

Russia's decision to pull out of the OPEC+ agreement triggered an initial price decline but this has been further exacerbated by Saudi Arabia's decision to discount prices deeply and to increase output.

Brent crude oil price fell from $46 at close on Friday to $36 currently ($31 at low point Monday morning) – the largest absolute one-day decline ever.

Russian companies have long argued that Saudi/Russian co-operation has come at the price of market share for both countries, with a permanent loss to US shale. Their answer is a period of sustained lower prices that can permanently reduce US production levels.

Meanwhile, Saudi Arabia's decision to discount prices deeply and to increase output is aimed largely at Russia, with the aim of bringing them back to the table and resuscitating OPEC+.

Sector implications include:

Energy sector will likely undergo a massive adjustment and financial flows can exacerbate the current price situation significantly.

E&P earnings forecasts were assuming much higher oil prices, so expect significant downgrades. Largest falls yesterday in oil & gas E&P companies, for example Pioneer & Marathon Oil, oil & gas equipment suppliers, for example Haliburton & Schlumberger.

Economic benefit to China (as significant oil importer), acting as stimulus at a difficult time...this could help the following sector where China is also a significant importer.

Mixed impact on materials - chemicals companies with pricing power could benefit as their contracts mean there is no necessity to pass on raw material gains, but there is likely to be some destocking and lower demand...Copper price had held up well but price weak yesterday as transportation remains disrupted and stockpiles grow.

Negative impact on financials – banks with exposure to E&P companies & large oil-exporting countries could see increase in loan delinquency rate. Expect millions of dollars of provisions against oil-related exposures; good news is no signs of financial stress at banks yet.

This is spurring on momentum – relative sector performance yesterday is similar to that experienced since the start of the virus crisis.

Does the reaction make sense?

The size of yesterday's reaction seems extreme but relative performance between sectors is broadly in line with oil price sensitivity as measured over the last three years.

Given the relatively low reaction yesterday, healthcare is looking most interesting as a defensive sector, especially as the most disruptive forces have been taken out of the Democratic candidate race and we expect billions of extra dollars spending on healthcare services worldwide.

Sector performance last week

Period shows response by sector when there was some relief in the market last week: S&P 500 +0.6%, MSCI World +0.4% (albeit MSCI Europe -2.2%).

Utilities – best performer since the start of the virus crisis, strength across the board (no big single stock attribution).

Consumer staples – biggest gains from Kroger (operates supermarkets & convenience stores in US), falls from food and beverage suppliers such as Anheuser-Busch after downgrades.

European real estate – notable performance versus US Real Estate, supported by good yield.

Energy – most stocks lower again, US & World sectors have shown greater sensitivity to oil price action since start of year because of higher proportion of E&P activities.

Financials – weakness in all industry groups (banking, insurance, financial services).