The energy sector has significantly outpaced the S & P 500 this year, with a 17% gain compared to the market’s 9%. It is now second only to the media and entertainment sector, which has seen a 20% increase in value. Additionally, energy has been the best performer over the past month, with a gain of nearly 14%. Despite these impressive numbers, the sector still lags behind the broader market by 14% over the past year, resulting in energy not being included in many momentum funds.
According to Jonathan Krinsky, a technical analyst with BTIG, the recent performance of the energy sector suggests that there may be more upside potential. He noted that the sector has just broken out of a two-year base, with relative strength turning up. This has led to speculation that energy could be the new momentum player in the market, as it shows signs of continued growth and stability.
The surge in the energy sector has been largely driven by the rallying prices of crude oil. U.S. crude has gained more than 19%, Brent is up over 16%, and gasoline futures have surged by 30%. JPMorgan even forecasted that Brent futures could reach $100 a barrel by September. This increase in oil prices has been attributed to tightening global supplies, robust economic growth, and a voluntary production cut by OPEC+ members.
Geopolitical tensions have added to the uncertainty in the market, as conflicts and potential supply disruptions loom. Ukraine’s attacks on Russian oil refineries, along with tensions between Israel and OPEC member Iran, have raised concerns about the stability of global oil supplies. Analysts like Rob Ginsberg from Wolfe Research are closely monitoring these developments and advising clients to take advantage of any overbought pullbacks in the market.
Leading energy companies like Exxon Mobil, Marathon Petroleum, Phillips 66, Valero, Diamondback Energy, and ConocoPhilips have all seen significant gains in their stock prices. Exxon Mobil hit an all-time high of $122.15, while the refiners Marathon Petroleum, Phillips 66, and Valero also reached record highs last week. Diamondback Energy is trading at all-time highs dating back to its IPO in 2012, and ConocoPhilips is at levels not seen since 2022. Even Occidental, which has gained 15% for the year, is now breaking out and showing signs of further growth potential.
As the energy sector continues to outperform the market and attract investors, it remains to be seen whether this trend will sustain. With the uncertainty in global oil supplies and geopolitical tensions on the rise, investors must carefully monitor the situation and make informed decisions about their investments in the energy sector.