Energy stocks have finally started to rise following oil. What has changed?
So far, securities in the sector have not shown any particular dynamics, although Brent and WTI have updated their highs for four years
Oil stocks have started to catch up with the rise in oil amid the war / Photo: Shutterstock.com/James Jones Jr.
Shares of oil and gas companies began to grow after oil on the background of the US war with Iran, although initially lagging behind. Investors began to lay down the probability of a more protracted conflict in the Middle East, Barron's believes.
Details
At the end of trading on March 12, securities of Exxon Mobil, Cheniere Energy and Occidental Petroleum grew by 1.3%, 1.4% and 5%, respectively. Chevron shares and BP and Shell receipts traded in the U.S. also grew significantly: by 2.7%, 1.4%, 1.1%, respectively. At the same time, Brent crude oil futures rose by more than 10% to $101.8 per barrel on Thursday.
The cost of oil has risen a cumulative about 38% since Feb. 27, the last trading day before the war in the Middle East began. However, shares of major energy companies have barely responded to this increase since the start of hostilities. For example, Exxon Mobil shares added only about 0.3% between February 27 and March 11.
Investors' initial caution could be related to both expectations about the short-term nature of the conflict and the risk of supply disruptions that could hit energy companies themselves, Barron's suggested. In particular, Exxon Mobil is working with QatarEnergy, which last week declared force majeure after an Iranian drone strike on one of its facilities. And an imminent end to the war would have quickly triggered a reversal in stocks as well, the publication noted. Now market sentiment is changing.
"Investors are pricing in longer-term scenarios because 6-month Brent crude futures were also rising in the morning [Thursday] by 3.06% to $82.97 a barrel, and with each passing day it is becoming harder to argue that the disruptions to shipping and energy infrastructure will prove only temporary," Barron's quotes Deutsche Bank strategist Henry Allen as saying. At the time of publication of this material, September futures on Brent were already up almost 7% to $87.9 per barrel.
The rise in oil stocks suggests that investors are starting to lay down the long-term disruption to shipping and energy infrastructure, which if expectations of a protracted conflict persist, could support further gains, Barron's concludes.
This article was AI-translated and verified by a human editor
