after the brutal sell-off, are E&P stocks a buy?

The 10% selloff in energy in the past three weeks doesn't seem so bad in comparison to the 7.5% decline in oil prices, but of course the equities had been declining faster than oil in the last weeks of September.  The Marcellus gas producers have held up particularly well, but that may be partly because of the Chesapeake sale to Southwestern of their southern Marcellus assets, which went for a nice price.  Oil producers in the unconventional plays need a relatively high price to make money.  Marcellus gas producers don't, or they'd be out of business.

If the oil price was going to stay where it is there are a number of decent buys out there, but why can't it fall further?  Supply has to come off the market or demand has to increase.  The market must be balanced.  The US seems to be doing its part on the demand side if booming SUV and pickup truck sales are any indication, but the auto industry on the whole is moving towards more and more efficient vehicles, and that doesn't seem to be changing.  China, the source of the biggest demand growth, appears to be slowing. Demand in oil tends to be very inelastic in the short term, so it is hard to see demand increasing and balancing the market in the short term.

On the supply side, we are now getting into earnings seasons, and it will be interesting if we hear about capex cuts in North America.  Due to the fast decline rates in unconventional, the production would certainly fall fast if they pulled back on capex in a significant way, but recently production has been growing with flat capex spending due to increasing efficiency by the drillers.  Many of these companies are hitting on all cylinders now, and I doubt we see them pull back unless the price goes down further.  They might talk up their willingness to cut capex in the event of a big price drop, but I bet most are taking a wait-and-see attitude for the moment.

We also have the November 27 Opec meeting.  Opec has a lot of competing interests now.  Nearly all the Opec countries are heavily reliant on oil revenues for their budgets.  But a few countries, like Venezuela, Iran, Libya, and Iraq, may be at risk of political collapse with prolonged oil price declines.  The situation in Algeria, Nigeria, Angola or Ecuador I don't even know enough to casually speculate about.  Russia (they are not an OPEC member) might be vulnerable to a severe economic collapse in a very big price drop scenario as well, especially given the western sanctions.  But many of the gulf states, like the Saudis, Kuwait, Qatar, UAE might be able to weather a rather long period of low prices, and if it derails US unconventional, Canadian oil sands, and deepwater to any extent, then that will put them in a stronger position for the long term.  If it causes a political crisis in Iran, then so much the better for the Gulf Arabs.  If I was in their position I might want to give the non-opec oil producers a good sweat, just like any prudent would-be monopolist, before balancing the market.  It will be interesting to see how they act.