Investing.com -- Short sellers in the U.S. and Canada, particularly in the energy sector, have experienced a challenging start to the new year, with $21.9 billion in year-to-date mark-to-market losses, a decrease of 1.59%. According to Ihor Dusaniwsky, Managing Director of Predictive Analytics at S3 Partners, the energy sector was the worst performing for short sellers, with the Energy Select Sector SPDR ETF (NYSE:XLE) and Vanguard Energy ETF up 8% for the year. This resulted in energy sector short sellers facing $5.8 billion in year-to-date mark-to-market losses, a decline of 7.13%.
In the energy sector, more than two-thirds of shorted stocks were unprofitable, with only 22% yielding profits and 10% showing no profit or loss. Furthermore, 92% of every dollar shorted resulted in losses, with only 8% in profits and an insignificant amount showing no profit or loss.
In early 2025, the only short sellers who profited over $100k were those who shorted CNX Resources (NYSE:CNX). The most unprofitable energy shorts were led by Chevron Corp. (NYSE:CVX) Despite these losses, there hasn't been a significant amount of short covering in the sector. The overall short interest in the energy sector increased by $4.9 billion to $83.2 billion, due to a $5.9 billion mark-to-market increase in the value of shares shorted, which was partially offset with $993 million of buy-to-covers.
In January, 50% of energy sector stocks saw increased short selling worth $1.8 billion, with the largest increases seen in Enbridge (NYSE:ENB), Tourmaline Oil, and Expand Energy. On the other hand, 44% of energy sector stocks experienced increased short covering worth $2.8 billion. The largest amount of short covering was seen in TC Energy (NYSE:TRP), Chevron, and Exxon Mobil (NYSE:XOM).
Interestingly, the performance of stocks that had increased short selling versus those with increased short covering did not differ. Both groups were down 7% for the month. Short sellers were unable to discern which short positions needed to be trimmed or built up in the first two weeks of the year.
The energy sector stocks were slightly more crowded on the short side than the rest of the market, with an average Crowded score of 42.99 versus the market average of 30.62. The most Crowded shorts, defined by larger short interest, SI % Float, borrow costs, and days-to-cover, included HighPeak Energy Inc, Profrac Holding Corp, and Atlas (NYSE:ATCO) Energy Solutions Inc. Some of the Squeeziest stocks in the Energy sector, which are crowded stocks with recent mark-to-market losses, included Profrac Holding, Comstock Resources (NYSE:CRK), and Magnolia Oil & Gas (NYSE:MGY) Corp.
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