Energy Stocks Climb As Oil Prices Shoot To New 2023 High—And Banks Say There’s More Room To Grow

Topline

Crude oil prices set another 2023 high Monday, surging upwards alongside energy stocks, which are gaining increasingly loud backing among market strategists.

Oil prices are on the rise.

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Key Facts

International benchmark Brent crude and U.S. benchmark West Texas Intermediate futures each hit their highest levels since November trading at $94 and $91 per barrel, respectively.

The oil benchmarks are up more than 10% apiece over the last month.

Similarly rising are energy companies poised to deliver strong profits should demand for oil remain strong; the S&P 500’s energy sector rose 0.7% Monday, extending its September gain to 4% compared to the overall index’s 1% loss during the stretch.

Both JPMorgan and Morgan Stanley predicted the energy sector Monday will outperform other equities moving forward.

JPMorgan strategists led by Marko Kolanovic explained they’re bullish on energy because investors have yet to properly allocate resources toward the asset class despite the surge in commodity prices.

A Michael Wilson-led Morgan Stanley group similarly cited a broad lack of exposure to the sector, pointing to energy companies’ strong financials compared to peers and expressing conviction that both oil demand and crude prices will remain robust.

Surprising Fact

Four of the eight best performers on the S&P over the last month are commodity companies, according to FactSet data.

What To Watch For

How high oil prices can go. It “sure looks like” oil will surpass $100 per barrel, Chevron CEO Mike Wirth predicted Monday in an interview with Bloomberg. That would be the most expensive price for oil since August 2022.

Big Number

14%. That’s how much more consumers globally shelled out for energy between this June and August compared to last summer, as tracked by JPMorgan.

Key Background

Energy was the S&P’s best-performing sector last year, with companies posting record profits as oil prices surged following Russia’s invasion of Ukraine. This year, returns for energy stocks lagged behind those of peers as investors’ appetite for risk recovered. The sector’s recent resurgence came as the oil-producing group of OPEC+ countries including Russia and Saudi Arabia agreed to joint production cuts.