After A Rough January, Energy Outpaces The Rest


Energy stocks powered through the broader market’s January slump and are poised to keep rising as long as oil prices stay high, industry experts predict.


Oil companies and firms that provide services to the industry have been a safe bet amid strong demand from the recovering economy and constrained oil supplies. The S&P 500’s energy sector is up 25% this year while nearly every other sector fell. The latest gains add to the sector’s 47% growth in 2021.

Exxon Mobil, which is up more than 30% for the year, highlighted the industry’s strength with its encouraging fourth-quarter financial results. It is among the biggest gainers of the year with fellow energy companies Occidental Petroleum and Hess.

Oil prices are near seven-year highs as OPEC sticks with cautious increases in the amount of oil it sends to the global economy even as demand increases. Prices are also getting support over concerns about a potential conflict between Russia and Ukraine.

Crude oil prices likely will remain at their high levels in the coming months, according to the Energy Information Administration. The picture for prices is hazier for the back half of the year. Prices could face more pressure if global oil production rises as consumption slows down. Prices could also remain high depending on supply chain problems and how central banks react to rising inflation.

“This kind of environment is set up well for near-term cyclical and value stocks,” said Ross Mayfield, investment strategy analyst at Baird. “It fits into the bigger narrative of value versus growth.”

The sector has been a bright spot for investors. The S&P 500 has so far shed 5.9% this year and the financial sector is the only other sector within the benchmark index to gain ground.

This article was taken from The Journal Record