NEW YORK (TheStreet) -- Oil prices were a sinking ship on Monday, capsizing energy stocks and almost everything else caught in their wake. The S&P 500 closed 0.72% lower, its largest drop in nearly two months.
Crude prices hit a five-year low with West Texas Intermediate down 4.2% to just over $63 a barrel after several investment banks, including Morgan Stanley and Bank of America, cut 2015 forecasts for oil.
Morgan Stanley analysts slashed their outlook for Brent crude to bottom as low as $43 a barrel in 2015 in its worst-case scenario. Bank of America reduced its West Texas Intermediate forecast to $72 by the end of next year.
Crude oil pain mightn't be over yet, Oppenheimer analysts predicted in a note. "The trajectory for crude oil appears to be one of stagnant to lower prices in the near- to intermediate-term," they wrote.
Oil companies are beginning to cut capital expenditure, including ConocoPhillips (COP) which announced a 20% reduction in capex next year, but it will take time for production levels to slow, said Christian Ledoux, senior portfolio manager for South Texas Money Management.
"That's because a lot of the wells they've drilled already are still in the ramp-up phase," he said in a call. "That means even as companies cut, there's still going to be a lag effect to when production actually slows."
Late November, OPEC agreed not to cut oil production to address oversupply, but instead said it would maintain current levels of 30 million barrels a day. In a statement, OPEC members said it would take such action "in the interest of restoring market equilibrium."