I want to look at the oil and gas sector, which is often overshadowed – but far from dormant.
Hello, Reader.
If you know the 1960s sitcom The Beverly Hillbilliesthen you’ll remember its kitschy theme song that refers to oil as “black gold,” a bubbling crude oil so lucrative that it moved the entire Clampett clan from Missouri to California.
Well, black gold remains just as attractive today.
As we discussed yesterday Smart moneythe energy sector is currently a “multiverse”, centered on both energy systems based on renewable and fossil fuels.
And despite the growing year-on-year deployment of renewable energy, deployments of “old” energy are also on the rise, colliding head-on with the narrative that “oil is dead”. And, more importantly, in the interest of our societies, to offer their own attractive investment opportunities.
However, most investors overlook historic energy sectors that have quietly racked up market-beating gains in favor of newer, more exciting sectors.
So today Smart moneyI want to examine the oil and gas sector, often overshadowed – but far from dormant.
And some of the intriguing opportunities it offers…
Discover a stealth success
The oil and gas sector has seen a moderate “stealth recovery” in recent years. Since the end of 2021, the S&P 500 Energy Sector subindex has produced a total return of 92%, more than seven times the return of the S&P 500 over the same period.
Despite this impressive performance, oil and gas stock valuations remain near historic lows. Valero Energy Corp.VLO) provides a textbook illustration. Shares of this flagship oil refiner have soared 36% year to date, hitting a new all-time high. But even at this record high, the stock trades at just seven times earnings, half its average valuation over the past 30 years.
The chart below shows another example of the energy sector’s relatively low valuations, comparing ExxonMobil Corp.XOM) to technological stocks. Using price-to-EBITDA ratios, the chart shows that Exxon’s valuation has fallen to a record low of 70%. discount to the valuation of the S&P Information Technology Sector sub-index.
As a result, oil and gas stocks currently offer exceptional opportunities, especially if energy prices continue to rise.
The brutal return
The signs are promising.
In the oil market, for example, the supply-demand balance is unbalanced in favor of demand. Last month, the International Energy Agency (OUCH) raised its forecast for oil demand growth in 2024 for the fourth time since November. The IEA now expects oil demand to reach 103 million barrels per day (bpd) in 2024, 1.3 million bpd higher than 2023 levels.
At the same time, the IEA cut its supply forecast to 102.9 million bpd, which would mean the crude market is heading for its first annual supply deficit since 2021.
Crude prices appear to have sensed the shift in supply and demand. The benchmark price of West Texas Intermediate crude has jumped 25% since the start of the year. This strong price movement in the oil sector could be the first fruits of a long-term recovery… even if electric vehicles catch fire again… figuratively speaking.
According to a report from Bernstein Research last year, electric vehicles will account for more than three-quarters of the global automobile fleet by 2040. But even if this optimistic forecast comes true, the report predicts that demand for crude oil will reach a record high. of 109.2. million b/d by 2030.
After this peak, Bernstein researchers expect demand to slowly decline to 105.3 million b/d by 2039. If this prediction comes true, oil demand would decline. upper In 15 years, this is not the case today.
The likelihood that demand for crude will continue to skyrocket in the coming years is reason enough for multibillion-dollar investments to be poured into the industry.
Other sources of crude demand are also on the rise. The “sick” Chinese economy, for example, is consuming a record level of 16 million barrels per day, or around 20% more crude than before the pandemic!
Many people believe that OPEC producers could easily increase production to meet any significant increase in demand. But the recent evidence is not very convincing. Production has been declining in many OPEC countries for years, and the cartel’s total output has fallen more than 15% from record levels reached in 2016.
The rise in the price of crude oil reflects these supply-demand trends. Oil stocks have also taken note.
The essential : It is clear that fossil fuels are a formidable competitor in the energy sector.
My Fry’s Investment Report The portfolio includes nine open positions in oil and gas stocks. Taken together, these stocks generated an average gain of 40%. But I think they still have a way to go.
So, to learn more about my favorite oil and gas stocks, find out how to join me on Fry Investment Report.
Click here to become a member today.
Greetings,
Eric Frire
Editor, Smart money
P.S. Another natural resource fuels the energy industry…
A remarkable trillion dollars The discovery of lithium was made in a deserted area of Nevada.
And there is still time to capitalize on growing demand for a resource absolutely essential to the modern economy.
Click here for more details.
I want to look at the oil and gas sector, which is often overshadowed – but far from dormant.
Hello, Reader.
If you know the 1960s sitcom The Beverly Hillbilliesthen you’ll remember its kitschy theme song that refers to oil as “black gold,” a bubbling crude oil so lucrative that it moved the entire Clampett clan from Missouri to California.
Well, black gold remains just as attractive today.
As we discussed yesterday Smart moneythe energy sector is currently a “multiverse”, centered on both energy systems based on renewable and fossil fuels.
And despite the growing year-on-year deployment of renewable energy, deployments of “old” energy are also on the rise, colliding head-on with the narrative that “oil is dead”. And, more importantly, in the interest of our societies, to offer their own attractive investment opportunities.
However, most investors overlook historic energy sectors that have quietly racked up market-beating gains in favor of newer, more exciting sectors.
So today Smart moneyI want to examine the oil and gas sector, often overshadowed – but far from dormant.
And some of the intriguing opportunities it offers…
Discover a stealth success
The oil and gas sector has seen a moderate “stealth recovery” in recent years. Since the end of 2021, the S&P 500 Energy Sector subindex has produced a total return of 92%, more than seven times the return of the S&P 500 over the same period.
Despite this impressive performance, oil and gas stock valuations remain near historic lows. Valero Energy Corp.VLO) provides a textbook illustration. Shares of this flagship oil refiner have soared 36% year to date, hitting a new all-time high. But even at this record high, the stock trades at just seven times earnings, half its average valuation over the past 30 years.
The chart below shows another example of the energy sector’s relatively low valuations, comparing ExxonMobil Corp.XOM) to technological stocks. Using price-to-EBITDA ratios, the chart shows that Exxon’s valuation has fallen to a record low of 70%. discount to the valuation of the S&P Information Technology Sector sub-index.
As a result, oil and gas stocks currently offer exceptional opportunities, especially if energy prices continue to rise.
The brutal return
The signs are promising.
In the oil market, for example, the supply-demand balance is unbalanced in favor of demand. Last month, the International Energy Agency (OUCH) raised its forecast for oil demand growth in 2024 for the fourth time since November. The IEA now expects oil demand to reach 103 million barrels per day (bpd) in 2024, 1.3 million bpd higher than 2023 levels.
At the same time, the IEA cut its supply forecast to 102.9 million bpd, which would mean the crude market is heading for its first annual supply deficit since 2021.
Crude prices appear to have sensed the shift in supply and demand. The benchmark price of West Texas Intermediate crude has jumped 25% since the start of the year. This strong price movement in the oil sector could be the first fruits of a long-term recovery… even if electric vehicles catch fire again… figuratively speaking.
According to a report from Bernstein Research last year, electric vehicles will account for more than three-quarters of the global automobile fleet by 2040. But even if this optimistic forecast comes true, the report predicts that demand for crude oil will reach a record high. of 109.2. million b/d by 2030.
After this peak, Bernstein researchers expect demand to slowly decline to 105.3 million b/d by 2039. If this prediction comes true, oil demand would decline. upper In 15 years, this is not the case today.
The likelihood that demand for crude will continue to skyrocket in the coming years is reason enough for multibillion-dollar investments to be poured into the industry.
Other sources of crude demand are also on the rise. The “sick” Chinese economy, for example, is consuming a record level of 16 million barrels per day, or around 20% more crude than before the pandemic!
Many people believe that OPEC producers could easily increase production to meet any significant increase in demand. But the recent evidence is not very convincing. Production has been declining in many OPEC countries for years, and the cartel’s total output has fallen more than 15% from record levels reached in 2016.
The rise in the price of crude oil reflects these supply-demand trends. Oil stocks have also taken note.
The essential : It is clear that fossil fuels are a formidable competitor in the energy sector.
My Fry’s Investment Report The portfolio includes nine open positions in oil and gas stocks. Taken together, these stocks generated an average gain of 40%. But I think they still have a way to go.
So, to learn more about my favorite oil and gas stocks, find out how to join me on Fry Investment Report.
Click here to become a member today.
Greetings,
Eric Frire
Editor, Smart money
P.S. Another natural resource fuels the energy industry…
A remarkable trillion dollars The discovery of lithium was made in a deserted area of Nevada.
And there is still time to capitalize on growing demand for a resource absolutely essential to the modern economy.
Click here for more details.