TOPLINE
While Russia’s invasion of Ukraine sparked a surge in oil prices that has roiled markets, energy stocks like Occidental Petroleum, Chevron and Exxon Mobil have widely outperformed the rest of the market, and analysts predict more opportunities to come.
KEY FACTS
The Energy Select Sector SPDR ETF, which tracks oil and gas companies, is up nearly 40% in 2022, compared to an 11% decline for the benchmark S&P 500 index—with energy being the only S&P 500 sector still in positive territory this year.
Oil prices have continued to skyrocket this week, rising to a high of nearly $130 per barrel after President Joe Biden announced an historic U.S. ban on Russian oil imports, before moderating somewhat on Wednesday.
Many analysts predict that oil and gas companies, many of which have seen shares outperform so far this year, are poised for more upside as they benefit from the sustained and rapid surge in energy prices.
With analysts still bullish on the sector, retail investors have been been piling into energy stocks at a fast clip, with top picks including the likes of Exxon Mobil (shares of which are 35% this year), Chevron (up 40%), Marathon Oil (up 40%) and Devon Energy (up 31%).
Occidental Petroleum’s stock—a recent favorite of legendary investor Warren Buffett—has surged nearly 100% in 2022, rising 50% in the last two weeks alone after Russia’s invasion of Ukraine caused a surge in energy prices.
Shares of San Antonio, Texas-based Valero Energy, which have recently been highly recommended by analysts from the likes of Morgan Stanley and Barclays, have surged nearly 20% this year amid the backdrop of rising oil prices.
SURPRISING FACT:
Billionaire Warren Buffett’s investing conglomerate, Berkshire Hathaway, recently doubled down on Chevron shares and revealed a nearly 10% stake in Occidental Petroleum worth roughly $5 billion, recent filings show. Buffett is the fifth richest person in the world, with a net worth of $117.8 billion, according to Forbes’ estimates.
KEY BACKGROUND:
Oil prices moderated somewhat—falling more than 10% on Wednesday, giving investors a brief respite from the ongoing uncertainty around surging commodity prices which has caused several days of market sell-offs. The ongoing conflict between major exporters Russia and Ukraine has wreaked havoc on global energy markets, which were already facing tight supply, since last month. What’s more, the impact of oil crossing $100 per barrel earlier this year—with no end in sight for the recent price surge—will be felt by Americans at the gas pump, economists have warned. U.S. gas prices are already at record levels, reaching a new all-time high of more than $4.25 per gallon on Wednesday, according to AAA data.
TANGENT:
Traditional oil and gas companies aren’t the only ones seeing shares jump. Oil tanker stocks have also surged double-digits this year amid rising global demand for fuel. Companies such as International Seaways and Frontline have both seen their stocks rise nearly 40% since the start of 2020.
FURTHER READING:
Dow Jumps 700 Points As Oil Prices Fall—But Worries Are Far From Over (Forbes)
By Sergei Klebnikov, Forbes Staff