Stocks in the energy sector have had a volatile run in 2023 so far. Against a backdrop of persistently high inflation and interest rates, the Energy Select Sector SPDR Fund (XLE), which tracks the performance of the S&P 500 Energy Index, is up only 6.7% on a YTD basis, compared to a gain of more than 17% for the S&P 500 Index ($SPX).
However, with OPEC+ members throttling production, oil prices are back on the upswing. Crude for October delivery (CLV23), the most active futures contract, hit its highest price in 10 months today as both Saudi Arabia and Russia moved to extend voluntary supply cuts through the end of 2023. Meanwhile, the Energy Information Administration (EIA) is already forecasting that demand will outpace supply.
