CA - Energy Income Weekly: Prepare Now For A Bullish Summer For Oil
2024-03-19 14:03:07 ET
Summary
- Oil prices now reflect fundamentals, but fundamentals are set to continue to improve.
- Oil-weighted E&Ps don’t reflect the bullish outlook and offer significant upside if oil prices are sustained above $80.
- We discuss how investors should be positioned as oil market conditions grow increasingly bullish heading into summer.
Energy Income Performance
The energy sector is finally getting the respect it deserves. After oil prices and energy stocks failed to reflect the energy market’s supply and demand fundamentals, we’re finally seeing an improvement. After this week’s 3.9% increase, WTI prices (CL1:COM) of $81 per barrel now reflect the reality of today’s low inventory levels and generally tight physical market conditions.
The bullish oil backdrop favored oilfield services ( OIH ) and E&Ps ( XOP ), which gained 4.5% and 3.8%, respectively. The high-yielding midstream sub-sector fared worse, ending the week flat after Treasury yields leapt higher. The 10-year Treasury yield (US10Y) traded to 4.3% during the week, gaining 5.4% due to domestic economic strength, a lower likelihood for Federal Reserve interest rate cuts, and Federal deficit spending that is excessive—to put it mildly—in the absence of a recession....
Energy Income Weekly: Prepare Now For A Bullish Summer For Oil