INVESTOR SERIES, SECTOR TRENDS
The energy sector has been the top performing sector in the S&P 500 index, Energy is up 47.9% year to date while the S&P 500 is down 14%. Within the energy sector, the integrated oil and gas subsector is up 53.8%, and the oil and gas exploration & production subsector has jumped by 52.6%.
Years of underinvestment in the oil and gas has become global problem
Despite falling oil prices over the past few weeks, there remains a shortage of refined oil, natural gas and diesel. Years of domestic and European underinvestment in oil and gas sector has caused serious supply issues. Natural gas has the most pressure for the short term.
Oil prices dropped by an average of 30% to 40% during the past five US recessions however…
There is no physical oil shortage but there are supply and market disruptions. Production of oil by U.S. energy companies is flat and unlikely to increase substantially for at least another 18 months. The nation’s plants are currently running at about 94% of operable capacity, the highest since September 2019.
As to why BIG OIL is not drilling more…
Following COV19, oil executives blamed Wall Street and nearly 70% cited “investor pressure to maintain capital discipline” as the primary reason oil companies weren’t drilling more despite historically high prices. Expect higher oil and gas prices for at least another one to two years.
OPEC will not let oil prices fall too low and would intervene with production quotas
The current price of oil doesn’t adequately reflect actual supply and demand. OPEC is aware of supply problem and that paper and physical markets don’t accurately represent what you would need to pay to acquire oil today.
Large scale investors shifting equity to energy
Our surveys and analytics indicate portfolio managers, large investors and traders have increased their exposure to energy for the remainder of 2022 and into 2023.
Below are the best-performing energy stocks year to date through August, which includes stocks from SPDR Fund ETF (XLE).
| Company and ticker symbol | Performance year to date (percent) |
| Occidental Petroleum (OXY) | 144.9% |
| Hess (HES) | 63.2% |
| Coterra Energy (CTRA) | 62.7% |
| Devon Energy (DVN) | 60.3% |
| Marathon Petroleum (MPC) | 57.4% |
| ExxonMobil (XOM) | 56.2% |
| Valero Energy (VLO) | 55.9% |
| Marathon Oil (MRO) | 55.8% |
| ConocoPhillips (COP) | 51.6% |
| APA (APA) | 45.4% |
Tip!
Warren Buffet is actively upping his stake in #1 on list Occidental Petroleum Corporation (OXY). He currently owns 27% of the company and has SEC approval to seek majority ownership. Tip! Look for Warren Buffet to take the company private, and we estimate a $95 public buyout offer … that’s a 42% upside to todays current market trading price.
