In the world of investing, the energy sector has taken the lead this year, surpassing nearly every other sector in the market. Analysts believe that there is still potential for the energy sector to continue advancing, with a significant 17% increase for the year. This growth far outpaces the 9% gain for the S & P 500 and is second only to the media and entertainment sector, which has seen a 20% increase. Furthermore, the energy sector has shown a remarkable gain of nearly 14% in the past month alone. Despite these positive indicators, the energy sector has underperformed the broader market by 14% over the past year. As a result, many momentum funds have not included energy due to their focus on 12-month performance.
According to Jonathan Krinsky, a technical analyst with BTIG, the energy sector recently broke out of a two-year base with relative strength turning up. This breakout has led to speculation that energy may be the new momentum in the market. Rob Ginsberg, a technical analyst with Wolfe Research, pointed out that the long-awaited energy breakout finally occurred last week as the Energy Select Sector SPDR Fund reached nine-year highs. The rise in the energy sector can be attributed to the surge in crude oil prices this year, following a significant drop in the last quarter of 2023.
Crude oil prices have seen substantial gains, with U.S. crude up more than 19%, Brent up more than 16%, and gasoline futures surging by 30%. JPMorgan has even forecasted that Brent futures could reach $100 a barrel by September. The rally in oil prices has been fueled by a combination of factors, including tightening global supplies due to voluntary production cuts by OPEC+ members and robust economic growth. Geopolitical tensions have also played a role, with conflicts in regions such as Ukraine and the Middle East raising fears of supply disruptions.
Exxon Mobil and other energy companies have seen significant gains, with Exxon Mobil hitting an all-time high on Friday and gaining over 21% for the year. Refiners like Marathon Petroleum, Phillips 66, and Valero have also reached all-time highs, with impressive year-to-date gains. Companies like Diamondback Energy and ConocoPhilips are trading at levels not seen in years, indicating a strong performance in the energy sector overall. Occidental, in particular, has shown a breakout and is poised for further growth according to analysts. This trend suggests that the energy sector rally may still have room to grow.
The energy sector has emerged as a standout performer in the market this year, showing strong gains and significant potential for further growth. With rising oil prices, geopolitical tensions, and positive stock performance, the energy sector presents an attractive investment opportunity for those looking to capitalize on the current market trends.