New York, 4 Aug, 2023 (GNP): Energy stocks have staged an impressive comeback, surging after a sluggish start earlier this year. During the third quarter, the energy sector of the S&P 500 index outperformed the benchmark, boasting a gain of over 6%.
The downturn in energy stocks at the beginning of the year defied expectations of accelerated global supply shortage. Despite output cuts announced by the OPEC+ producers, including Saudi Arabia and Russia, energy reserves remained low.
However, in recent months, there has been a much-needed increase in energy reserves. Saudi Arabia’s significant production cut of 1 million barrels per day from July to September, played a key role in boosting crude oil prices.
Also Read: Oil rises 1% on Saudi plan to deepen output cuts from July
Currently, crude oil is hovering above $80 a barrel, after dropping below $70 earlier this year. US WTI crude oil prices have risen by 22% since June 11, while global benchmark Brent is up by 19%.
Demand for crude oil has increased due to output cuts along with a busy summer travel season. The future for energy stocks is looking better than it has all year, along with a brighter outlook for the economy as investors grow more confident that the Federal Reserve may soon halt hikes in interest rates.
Recent quarterly earnings reports from major oil companies have shown mixed results. However, forward-looking guidance from these companies has largely been optimistic, giving investors reason to be hopeful. Chevron, for example, expects strong free cash flow and plans to resume share buybacks during the fourth quarter, signaling confidence in its financial performance. Other oil giants like Shell and BP have also increased their quarterly profits.
Also Read: Oil prices surges due to Chinese demand and weakening dollar
As per sources, OPEC+ is unlikely to alter its current oil policy in its upcoming meeting, but it will likely remain vigilant in maintaining high oil prices. This, coupled with the expected increase in demand as China works to revive its economy, could further support crude prices. However, any economic slowdown could potentially exert downward pressure on prices.
In light of the recent positive trends, some experts predict that oil prices could rise back to $100 a barrel if the current momentum continues. Investors are closely watching the energy sector, with many findings renewing optimism about its prospects.
