Share this

The S&P 500 index’s energy sector is on pace for the biggest percentage gain on record, marking a comeback for a sector hard hit by early pandemic shutdowns.

The energy sector has gained almost 50% so far this year from a rebound in consumer travel, beating its last record of around 25% in 2016, according to FactSet data going back to at least 1990. Prices for U.S. crude and the global oil benchmark Brent crude have also gained over 50% this year.

Even after a recent tumble in prices due to investor concerns over the Omicron variant, energy has held on to most of its gains for the year. Prices skyrocketed in 2021 after the U.S. eased Covid-19 restrictions and consumers returned to the roads.

Energy costs typically mirror investors’ perspective of the economy’s health with prices dipping with new Covid-19 variants and increased case counts before bouncing back. The high energy prices now suggest investors expect continued growth in 2022 but the role of inflation on prices makes the economic picture less clear.

Economic shutdowns from new variants threaten the energy sector’s prospects in 2022, although local governments in the U.S. so far haven’t replicated the lockdowns of 2020. Some analysts remain optimistic about the sector, citing that an increase in vaccination rates around the world and a growing expertise on managing the virus won’t hinder travel.

Low supply from U.S. producers and the Organization of the Petroleum Exporting Countries also helped elevate prices in 2021.

“Oil and natural gas and unfortunately even coal are going to be pretty critical elements for global economic growth into the future, as well, and investors are finally recognizing that,” said Rob Thummel, senior portfolio manager at TortoiseEcofin.

Companies within the oil and gas exploration and production category have grown the most with shares of Devon Energy Corp. nearly tripling this year.

“It’s going to be another year for potential for outperformance, driven by the return of cash to investors,” Mr. Thummel said.

Among the laggards within the energy sector are companies that deal with equipment and services, storage and transportation, refining and marketing: Baker Hughes Co. advanced 17%, Kinder Morgan added 16% and Phillips 66 edged up 4.5%.

Companies within the oil and gas exploration and production category have grown the most.

Photo: Jim West/Zuma Press

Energy companies focused on returning cash to shareholders through buybacks and dividends, attracting investors. Some climate-minded investors, however, missed out on Wall Street’s hottest trade of the year, over concerns about fossil fuels’ impact on the climate.

Despite the surge this year, big tech stocks continue to drive gains in the S&P 500 because energy has one of the lowest weightage in the broad-based index.

The S&P 500’s information technology sector gained around 60% in 2012, the last time any top performing sector gained as much as energy. The real estate and information technology sectors are trailing energy this year, gaining 42% and 35%, respectively.

Copyright ©2021 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Source: WSJ

Share this
You May Also Like

Mississippi Golfer Arrested After Allegedly Biting Off Man’s Nose During Argument

BAY ST. LOUIS, Miss. (AP) — An argument between two men over…

Florida Man Flees Deputies On Bicycle, Ends Up Hiding In Tree

A Florida man hid in a tree after fleeing from deputies on…

Jacksonville Sheriff’s Office: 13 year old killed in driveby

An 11-year-old boy was also injured and is in stable condition. The…

Nassau County Sheriffs Office starts new cold case unit

This unit was created after the Nassau County Sheriffs Office noticed there…

Deadly drive-by shooting on Northside leaves multiple teens, driver injured

JACKSONVILLE, Fla. – The Jacksonville Sheriff’s Office is investigating a drive-by shooting…

New LA sheriff vows accountability, integrity for department

LOS ANGELES – The new head of the nation’s largest sheriff’s department…

Huge queues as families brave cold to see the Coca-Cola Christmas truck in Bradford

Large turnout of families to see the iconic Coca-Cola Christmas truck

Body of 7-year-old Texas girl found, FedEx driver arrested

PARADISE, Texas – A 7-year-old Texas girl has been found dead, two…

Family of injured worker calls on community support after deadly warehouse fire

ORLANDO, Fla. – Three people are now dead and two others injured…

Indiana judge won’t block probe over 10-year-old’s abortion

Indiana’s Republican attorney general may continue to investigate an Indianapolis doctor who…

Illinois lawmakers OK SAFE-T Act tweaks; plan ends bail

SPRINGFIELD, Ill. (AP) — Democrats who control the Illinois General Assembly approved…

Arrest Made in Murders of 2 People Found Dead in Car With Toddlers Alive in Back Seat

Eric Coley/Rocky Mount Police Department Police in eastern North Carolina have arrested…