Why Energy Giants ConocoPhillips, Chevron, and Cheniere Sank as GDP Weakness and Sector Headwinds Collide

The energy sector faced a brutal sell-off on May 1, 2025, as ConocoPhillips (COP), Chevron (CVX), and Cheniere Energy (LNG) all fell sharply. The decline was driven by a toxic mix of macroeconomic fears, sector-specific challenges, and company-specific risks. Here’s what investors need to know.

The Catalyst: A Weaker Economy Drags Down Energy Demand

The primary trigger was the release of Q1 2025 GDP data, which showed the U.S. economy contracted by 0.3%—its first quarterly decline since 2020. Economists had expected modest growth of 0.4%, and the miss amplified fears of a broader slowdown. Energy stocks are highly sensitive to economic activity, as oil and gas demand is tied to manufacturing, transportation, and industrial output.

The GDP report sent crude prices tumbling: WTI crude fell 1.4% to $59.50/barrel, while Brent dropped to $63.30/barrel. This hit the profit margins of oil producers like Conoco and Chevron, which rely on higher prices to justify exploration and production.

ConocoPhillips (COP): Downgraded Amid Broader Sector Caution

Conoco’s stock fell 2% as Bank of America analyst Kalei Akamine downgraded it to “Neutral”, lowering his price target to $107 from $138. The analyst cited a “softening macroeconomy” and OPEC’s lack of cohesion in managing supply. Investors grew wary of speculative plays in an uncertain environment, prompting a rotation into “defensive” energy stocks.

Conoco’s valuation also came under pressure: its P/E ratio of 12x and weaker dividend yield (3.4%) compared to peers made it a target for profit-taking.

Chevron (CVX): Earnings Concerns and Trade Tensions Weigh Heavily

Chevron’s stock dropped 2.2% as investors digested downward revisions to its earnings estimates. Analysts had slashed Chevron’s Q1 2025 EPS forecast to $2.30, a 21.5% decline from 2024. The company’s exposure to crude prices was exacerbated by escalating U.S.-China trade tensions, which risked curbing global demand.

Geopolitical risks, including easing Middle East tensions and OPEC+ supply increases, further depressed oil prices. Chevron’s 4.9% dividend yield and growth profile (8% annual earnings growth) provided some support, but macro fears overshadowed these positives.

Cheniere Energy (LNG): Downgraded Over LNG Supply Competition

Cheniere faced the steepest decline—3.6%—after Wolfe Research downgraded it to “Peer Perform” (hold), citing rising LNG supplies from global competitors. Analysts warned that new projects from Russia, Qatar, and Australia could depress returns on Cheniere’s growth initiatives, such as its CCL Stage 3 expansion.

Adding to the pressure: Cheniere’s high valuation (P/E of 17x) and minimal dividend yield (0.8%) made it vulnerable to sector-wide pessimism. Investors also worried about its $12.5 billion debt load, which could strain finances if LNG prices weaken further.

Broader Sector Weakness

The energy sector’s struggles were not isolated. The S&P 500 Energy Index fell 2.5% on May 1, underperforming the broader market’s 0.6% gain. Analysts noted that energy companies in the index were projected to report a 12.9% year-over-year earnings decline in Q1 2025, driven by margin pressures and lower commodity prices.

Conclusion: A Perfect Storm for Energy Investors

The May 1 sell-off reflects a convergence of risks for energy stocks:
1. Macroeconomic headwinds: The GDP contraction spooked demand forecasts, with oil prices hitting levels that threaten profitability.
2. Sector-specific challenges: Oversupply in LNG markets and geopolitical shifts are undermining pricing power.
3. Company-specific risks: Downgrades, debt concerns, and valuation gaps (especially for Cheniere) amplified investor caution.

While Chevron’s fundamentals remain stronger than peers, and Conoco’s valuation is relatively cheap, the path forward depends on whether the U.S. economy avoids a deeper slump and whether oil prices stabilize. Investors should monitor Chevron’s Q1 earnings on May 2 and Cheniere’s May 8 report for clues on the sector’s resilience.

In the near term, energy stocks face an uphill battle. But for long-term investors, the declines may present opportunities in companies with strong balance sheets and exposure to global energy transitions—provided the economy avoids a hard landing.