While geopolitical tensions and macroeconomic volatility marred the overall economy last year, the oil and gas sector performed significantly well. The Energy Select Sector SPDR Fund (XLE) has gained 41.8% over the past year, whereas the SPDR S&P 500 ETF Trust (SPY) declined 16% over the same period.
Reopening the Chinese borders after strict COVID-19 restrictions have spurred optimism and could push the oil prices further up from the current levels. On top of it, Morgan Stanley (MS) expects the oil market to tighten during the third and fourth quarters of this year due to a recovery in demand prompted by China reopening its borders, among other factors.
