If you are wondering if it's too late to get into energy stocks the best answer is no. Energy prices are down from their peak and there is a potential slowdown in demand on the way but, for now, the underlying fundamentals are highly in favor of higher share prices. Not only are these companies raking in "windfall" profits but they are on track to return a bundle of that cash to investors. Companies from Exxon Mobil (NYSE: XOM) to Chevron (NYSE: CVX) and BP (NYSE: BP) have already turned in their reports and confirmed this outlook, companies like Occidental Petroleum (NYSE: OXY), ConocoPhillips (NYSE: COP), and Marathon Oil (NYSE: MRO) are yet to do so and will most likely do the same. The takeaway for investors is that windfall profits are going to continue for the foreseeable future and may even get better before they get worse.
Oil Prices Are Underpinning Windfall Profits
Oil prices are underpinning the windfall profits and those are not likely to come down substantially from their current levels. The Russia/Ukraine conflict has been priced into the market by this point which leaves the fundamentals to support the market and the fundamentals are bullish. Point the finger where you will but global capacity has been constrained on many levels and does not support the idea of lower oil prices. The IEA, for one, is forecasting global demand to run at 101.3 million barrels per day in 2023. That's up slightly from 2022 and offset by production that is averaging 101.2 million barrels per day in 2022. As small as it is, the balance is tilted in favor of demand and that will keep prices up. There is a chance that producers like OPEC or the US, the two single largest production entities with any hope of truly rebalancing the market, but don't hold your breath.
Turning to the chart of WTI, the US benchmark for oil quality standards as well as prices, the market has established a new range with a bottom at $80. It looks like the market may try to equalize around a new "normalized price" that could be anywhere from $80 on up at this stage in the game. The most recent weekly action shows strong support at this level and the indicators are in support of this analysis.
The indicators, stochastic oscillator and MACD histogram are set up, in fact, to fire a very strong bullish signal for oil prices with the next upswing in prices (if it comes, it may not although it appears to be on the way). Such a signal, where the MACD makes its bullish crossover in support of the bullish signal the stochastic is already firing, could take this market up above the $100 level but there is a risk. There may be resistance at the $96 level at or just below the 30-day EMA but, if the market can get above those levels, they will only add strength to the bullish case as previously bearish short-term and swing traders turn bullish. The bottom line is that oil prices will be at or above the current levels for the foreseeable future and fuel the windfall profits in the energy sector.
The Energy Sector Is In An Uptrend And New Highs Are At Hand
Looking at the Energy Sector from the dividend perspective, the Energy Sector SPDR XLE (NYSEARCA: XLE) is yielding about 3.4% and is up more than 30% after correcting earlier the year. Others within the group, like Exxon Mobil and Chevron, yield better but those with the lower yields have the most robust outlooks for dividend increases and they all have bullish-looking charts. The action in the ETF is supported by results in the sector and the indicators which are both bullish. A move to a new all-time high would be a trigger for new bullish positions and would come with a target near $110 which would be a new all-time high and a 22% gain from the current price levels.
FAQs
It's not too late to lock in an enticing total return
Despite its rally, Energy Transfer remains relatively cheap compared to other pipeline companies. Because of that, it's not too late to buy. The company has a clear catalyst on the horizon (unit repurchases) and still offers a very attractive income stream.
Is it a good time to invest in energy stocks? ›
The uptick in energy stock performance comes as inflation appears to be subsiding and prices for crude oil and natural gas have declined significantly. In contrast to returns in 2023 and so far in 2024, the energy sector gained 65.72% in 2022 and 54.64% in 2021.
What is the outlook for energy stocks in 2024? ›
The S&P 500 energy sector (.SPNY) , opens new tab is up about 17% in 2024, roughly doubling the broader index's (.SPX) , opens new tab year-to-date return. Its gains have accelerated in recent weeks, making it the S&P 500's best performing sector in the past month.
Why are energy stocks doing so well? ›
Rising crude-oil prices have helped push energy stocks to record highs for the first time in nearly a decade. But it will take more than that to keep the rally going. Back in December, few Wall Street analysts expected energy stocks would outperform the Nasdaq-100 in 2024.
What sector will boom in 2024? ›
Investors looking for stocks poised to perform well in 2024 might want to consider industrials — companies that make stuff that manufacturers use to make stuff ultimately purchased by commercial and retail customers.
Will energy stocks bounce back? ›
Key Takeaways. Energy is struggling to keep up with the broader market this year. However, an improving technical setup for energy stocks points to a potential rebound for the sector.
What is the outlook for energy investing? ›
Investments in the energy sector are projected to grow from $1.5 trillion today to between $2.0 and $3.2 trillion by 2040, representing growth of between 35 and 120 percent.
Which energy stock is best to buy now? ›
The following list highlights ten standout energy stocks that showcase resilience, innovation, and potential for growth in the evolving landscape of renewable and traditional energy sources.
- Reliance Industries. ...
- ONGC. ...
- Adani Green. ...
- Oil India. ...
- GAIL. ...
- Indraprastha Gas. ...
- Coal India. ...
- IOCL.
Final verdict. The utilities sector has plenty of stocks with attractive dividend yields and the possibility of generating robust long-term gains for investors. Utility stocks may be a particularly attractive option in 2024 given market expectations for falling interest rates.
What are the top 3 energy stocks? ›
Cheniere Energy, Inc. (NYSE:LNG), Occidental Petroleum Corporation (NYSE:OXY), Exxon Mobil Corporation (NYSE:XOM), and Chevron Corporation (NYSE:CVX) are some of the best energy stock to invest in.
Best energy stocks as of April 2024
| Company and ticker symbol | Performance in 2024 |
|---|
| Phillips 66 (PSX) | 22.7% |
| Marathon Oil (MRO) | 17.3% |
| Pioneer Natural Resources (PXD) | 16.7% |
| Exxon Mobil (XOM) | 16.3% |
6 more rowsApr 1, 2024
It can be extremely difficult to predict how stock prices will fluctuate in a given year, but Wall Street analysts seem to believe 2024 will be a good year for oil stocks.
What is America's number 1 energy stock? ›
Exxon Mobil (XOM), Chevron (CVX) and Schlumberger (SLB) are some of the most trending stocks in the energy sector. See how they compare to other companies such as Williams Co (WMB), Phillips 66 (PSX) and Kinder Morgan (KMI).
Why energy stocks are gushing high dividends? ›
Dividend growth has surged as energy companies focus on returning cash to investors. Dividend investors have a new sector to explore when digging for companies with high and growing income: energy companies. Dividend-paying energy companies aren't anything new, of course.
Why clean energy stocks are down? ›
clean energy witnessed one of the toughest years in its short history. Supply chain issues, the energy crisis post Russia's invasion of Ukraine and the ensuing ramp of interest rates and inflation hit all entities across the natural resources value chain.
What is the future of energy investing? ›
Global energy demand is poised for substantial growth in the coming decades, which is creating attractive investment opportunities across the alternative energy landscape and the traditional energy value chain. Population and economic growth are the main catalysts for increasing global energy demand.
What is the future outlook for the energy sector? ›
While energy stocks have had a slow 2023, I believe 2024 could be bright, thanks to continued high oil prices and rising investments in energy production. Among the potential beneficiaries: oil producers and energy equipment and services companies.
What is the future of the energy sector? ›
In this scenario, the share of fossil fuels in global energy supply, which has been stuck for decades at around 80%, declines to 73% by 2030, with global energy-related carbon dioxide (CO2) emissions peaking by 2025. “The transition to clean energy is happening worldwide and it's unstoppable.
