Displaying items by tag: energy

There’s no question that energy was the best-performing sector this year in what was a dismal year for equities. But how will the sector fare in 2023? If analyst expectations are correct, we could be in for another great year for energy stocks. According to FactSet data, analysts have increased estimates for only two sectors next year, energy and utilities. EPS estimates for energy stocks have seen a 4.4% rise in expectations, while utility stock estimates have risen 0.9%. This is in stark contrast to the other 9 sectors in the S&P 500, where analysts have been trimming their earnings per share forecasts for 2023, with downward revisions between September 30 and November 30. Due to these upward earnings expectations and relatively cheap valuations, energy stocks are poised to continue their rise next year, even as oil prices have pulled back from the year’s highs. Oil companies have been cautious despite the surge in oil prices earlier in the year. CIBC Private Wealth U.S. Sr. Energy Trader Rebecca Babin told Yahoo Finance Live that companies “are not making rash decisions about increasing production based on swings in oil prices. They are less levered. They are more disciplined, and they are super focused on returning to cash.” Plus, market strategists expect oil to move higher next year with China expected to reopen its economy after years of COVID closures.

Finsum:Energy stocks are expected to continue to move higher next year due to increased analyst estimates, relatively cheap valuations, and higher demand for oil by China.

The energy sector has been the top-performing sector so far this year, but it may be time to sell. That is according to JPMorgan's Marko Kolanovic. Kolanovic, who is JPMorgan’s chief global markets strategist, recommends that investors sell out of energy stocks to capitalize on the performance divergence between oil and energy stocks. Oil prices surged more than 72% at the beginning of the Russia-Ukraine war, but have since plunged almost 50% and are now down for the year. The decline in WTI and Brent Crude Oil can be seen at the pump as the average price for a gallon of gas in the U.S. fell to $3.32 on Friday after previously hitting $5 earlier in the year. However, as oil prices have fallen, oil stocks are still trading near their multi-year highs. Historically, oil prices and energy stocks have been highly correlated, but the large difference this year and a broad pullback in the equity market could result in a selloff in energy stocks. Kolanovic believes that investors could take advantage of this by selling energy stocks now and then buying them at a lower price before the next upswing.

Finsum:JPMorgan strategist recommends selling energy stocks now before a major pullback that could be driven by the divergence between falling oil prices and rising energy stocks.

CEOs of top U.S. energy companies are speaking less about climate and carbon emissions, according to a Bloomberg analysis of quarterly conference calls held by 172 American oil and gas companies. The data showed how terms such as “climate change”, “energy transition” and “net zero” have been coming up with less frequency in recent conversations with analysts and investors. For instance, in fossil fuel suppliers’ conference calls this quarter, the use of language that alludes to environmental, social, and governance topics was down by more than 40% from peak levels in 2021. In fact, mentions of the terms “climate change,” “energy transition,” “emissions,” and “renewables” have all decreased. The analysis was based on an automated search of terms related to ESG issues in transcripts of quarterly earnings calls from publicly traded energy companies that hold calls in English. Prior to this year, energy companies were under pressure to slash greenhouse gas emissions, which led to a spike in discussions about ESG. But with fossil-fuel profits now soaring, ESG mentions have fallen, signaling that the industry’s focus on ESG might be fading.

Finsum:With fossil-fuel profits soaring, U.S. energy CEOs are speaking less and less about ESG.

If a new bill in the Senate gets passed at some point, ESG investing in retirement plans may become a thing of the past. On July 26th, Senator Mike Braun of Indiana introduced The Maximize Americans’ Retirement Security Act (S. 4613), legislation that would clarify that the fiduciary duty of plan administrators is to select and maintain investments based solely on “pecuniary” financial factors. Based on the legislation, pecuniary factors are defined as any factors that a fiduciary prudently determines are expected to have a material effect on the risk or return of an investment. The bill, which was co-sponsored by seven other GOP senators, would curb the Department of Labor’s efforts to make it easier for plan fiduciaries to consider ESG factors when selecting plan investments. ESG investing has become a hot political topic as of late, and its recent underperformance during the bear market has only further added to the scrutiny.

Finsum: With ESG becoming a hot political issue, GOP Senators introduced a bill that would curb the DOL’s efforts to make it easier for plan fiduciaries to consider ESG factors in plan investments. 

Oil prices have begun to stagnate just a hair, but they are still high enough to spur lots of production. U.S. oil output is expected to be 12.86 million barrels a day according to East Daley Capital, which is a 23% increase from their December forecast. Most of the increased production will come from shale Fields in the Permian Basin, as elevated prices can sustain drilling and production here. Additionally, supply chains are relatively more lubricated, the Russia-Ukraine conflict looks ongoing, and a massive Covid resurgence seems like a small probability. The Dallas said profits are more than sustainable to continue drilling in the Permian Basin and other shale sites.

Finsum: This increased production could be enough to finally cap the upward moving gas prices, but that effect could take some time.