Even though the energy sector of the S&P 500 is the only one to rise this year, investors seem still to be at an early stage of a lucrative multi-year cycle.
The combination of underinvestment in new oil wells and rising demand underscores what might be a long period of high prices for energy commodities. Meanwhile, many oil and gas stocks are still trading at low valuations to expected earnings despite a sector-wide rally stretching back to the end of 2020.
Underinvestment is good for oil industry and investors Back on March 2, Sam Peters, a portfolio manager at ClearBridge Investments, provided this chart for this article that featured two of his energy stock selections: In the previous article, Peters recommended two stocks: EQT Corp. EQT, which rose 50% from March 1 through May 10, and Pioneer Natural Resources Co. PXD, which rose 4%. Those price increases exclude dividends — Pioneeer’s dividend yield is 6.96%.
Wong estimated that as 2022 began, world demand for crude oil ranged from 100 to 101 million barrels a day, while oil was being produced at a rate of about 98.5 barrels a day.Wong said new oil sources in the U.S. over the past 10 years had been mostly “short-term supply growth” because “you lose 50% to 70% in the first year” of a shale well’s operation.
Favored oil stocks Wong pointed to Canada as a friendlier market for U.S. investors because Canadian wells tend to last 20 to 25 years, by his estimate.
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