NEW YORK (TheStreet) -- The oil services sector could continue its downward spiral as energy prices fall from summer highs and seeming settling of international strife in energy producing regions.
TheStreet's Jill Malandrino has more on why the energy markets and related stocks are moving to the downside:
United States Oil Fund (USO) and United States Natural Gas Fund (UNG) are down more than 10% over the past few months, potentially weighing on future profits and share prices of companies in Market Vectors Oil Services ETF (OIH) , as is seen in the chart below.
Share prices of oil service companies correlate strongly to energy prices as profit margins generated by drilling and other service firms rise and fall with the price of oil and natural gas. Lower energy prices call for less urgent exploration and less use of oil service company products.
The decline of geopolitical strife overseas, moderate summer temperatures and the rising U.S. dollar have all been cited as reasons for declining energy prices recently.
Tensions between Russia and Ukraine have calmed from its peak in June, when many believed a violent intervention from Western powers against Russia was a real possibility. Considering Russia is one of the top oil exporters in the world, prices of Brent crude oil spiked on the idea of supply concerns in the region.