Top line
Crude oil prices hit a new 2023 high on Monday, climbing alongside energy stocks, which are receiving increasingly strong support among market strategists.
Oil prices are rising.
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Highlights
International benchmark Brent crude and U.S. benchmark West Texas Intermediate futures each hit their highest levels since November, trading at $94 and $91 a barrel, respectively.
Oil benchmarks have each risen more than 10% over the past month.
Likewise, energy companies are poised for solid profits if demand for oil remains strong; The S&P 500 energy sector rose 0.7% on Monday, extending its September gain to 4% compared with the overall index’s 1% loss during the period.
JPMorgan and Morgan Stanley predicted Monday that the energy sector will outperform other stocks in the future.
JPMorgan strategists led by Marko Kolanovic explained that they are bullish on energy because investors have yet to properly allocate resources to this asset class despite soaring commodity prices.
A Morgan Stanley group led by Michael Wilson also cited a widespread lack of exposure to the sector, highlighting the financial strength of energy companies relative to their peers and expressing belief that oil demand and crude prices will remain robust.
Surprising fact
Four of the eight best-performing companies in the S&P over the past month are commodities companies, according to FactSet data.
To monitor
How high oil prices can go. It “looks like” oil will exceed $100 a barrel, Chevron CEO Mike Wirth predicted Monday in an interview with Bloomberg. This would be the highest oil price since August 2022.
Large number
14%. That’s how many more consumers around the world paid for energy between June and August compared to last summer, according to JPMorgan.
Key context
Energy was the S&P’s best-performing sector last year, as companies posted record profits as oil prices soared following Russia’s invasion of Ukraine. This year, energy stock returns have lagged those of their peers as investors’ risk appetite has recovered. The sector’s recent resurgence came as the oil-producing group of OPEC+ countries, including Russia and Saudi Arabia, agreed to jointly cut production.
Further reading
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