Energy prices have soared this year, boosted first by strong demand and then by the Russia-Ukraine war, which crimped supply.
U.S. oil prices have jumped 51% year to date, recently trading at $113.42 a barrel. Gasoline prices have surged as a result.
The national gasoline price averaged $4.24 a gallon on Wednesday, up a whopping 47% from $2.88 a year ago, according to the American Automobile Association. In Los Angeles County, the average gas price passed $6 a gallon, The Los Angeles Times reports.
These price increases have pushed energy stocks higher. The S&P 500 Energy index has climbed 39% so far this year, compared with a 6% drop for the overall S&P 500.
Hot stocks include Occidental Petroleum (OXY), which has more than doubled (up 117%); oilfield-service provider Halliburton (HAL), which has risen 67%; Chevron (CVX), which has gained 42%; and Exxon Mobil (XOM), which has increased 38%.
Insiders have purchased shares recently at energy explorer APA (APA) and shale-oil producer Coterra Energy (CTRA), Barron’s reports. Insider buying bodes well for a stock, as insiders should know the company best.
With technology stocks dropping while energy shares have ascended this year, “The new FANG is going to be fuel, agriculture, natural resources and gold,” Nick Giacoumakis, president of Neirg Wealth Management, told The Wall Street Journal.
He was referring to the famous acronym that includes Facebook (Meta Platforms), Amazon, Netflix and Google (Alphabet).
Don’t expect the rise in energy stocks to much affect the broader market. Energy shares account for just 4% of the S&P 500, down from 15% at the top in 2008 before demand for oil and gas waned, The Journal reports.
Energy stocks do have potential for more gains, some experts say. One of them is Savita Subramanian, head of U.S. equity and quantitative strategy at Bank of America.
“Valuations are still relatively attractive,” she told Bloomberg March 8. “These companies are generating free cash. Fund managers have not necessarily bought into the energy sector. They’re still quite underweight.” Investors have been scared away by environmental concerns, Subramanian said.
Daniel Chung, CEO of investment manager Alger, likes shale producers Diamondback Energy (FANG) and EOG Resources (EOG), Barron’s reports. The Russia-Ukraine war can help those stocks by pushing the U.S. away from tenuous oil sellers like Russia, he said.
