Exploring Lucrative Stock Opportunities Amidst Soaring Gas Prices
Stocks have had a strong start to the year, defying concerns over war escalation in the Middle East and the volatility in the market. One sector that has stood out is energy stocks, which have outperformed and are expected to continue their rally throughout 2024.
Many experts believed that the energy sector would experience supply shortages similar to those seen in the 1970s due to Russian aggression, OPEC+ supply constraints, and China’s recovery from the COVID-19 pandemic. However, 2023 proved to be a disappointing year for energy bulls, as the sector only gained 2.5% globally while world stocks soared 23.8%.
The decline in oil prices played a significant role in the underperformance of energy stocks. Global production increased, easing concerns about supply shortages, and Biden’s temporary ban on new federal land leases did not have a significant impact on US output, which reached record highs.
Despite the disappointing performance in 2023, energy bears are making the same mistake by dismissing the current rally in energy stocks as temporary. They believe that OPEC+ cuts, conflicts in Ukraine and the Middle East, and investor sentiment will hinder the sector’s growth. However, oil prices are expected to remain strong in 2024, fueling profits for energy firms and driving up oil and gas stocks.
The rally in energy stocks is not solely due to ongoing OPEC+ cuts or regional conflicts. Instead, it is driven by incentives. Energy companies have increased production to take advantage of higher prices following the Ukraine invasion. Biden’s pause on new LNG export terminal permits is unlikely to have a lasting impact on the industry, as existing terminals will continue to supply the world.
Furthermore, US producers are completing wells at a faster rate than they are drilling new ones. This means that less inventory will come online quickly, and producers are not replacing it. The global mega-drillers dominate the market, and their production targets, along with the decline in US rig counts and drilled wells, indicate a slowdown in output in the near future.
Analysts who underestimate global oil demand are also contributing to the pessimistic outlook on the energy sector. The solid GDP growth in the US, better-than-expected economy in the eurozone, and steady consumption in China signal stronger oil demand than anticipated.
All of these factors point to a major rally in oil prices, surpassing the highs of 2023. This, coupled with cost discipline, is expected to lead to an earnings bonanza for energy firms. US and UK oil companies are particularly well-positioned to benefit from this rally due to their strong balance sheets, low-cost production, and integrated business models.
While high oil prices may result in high gas prices, it is important to note that this does not have a significant impact on the overall economy or stocks. History has shown that the global economy and stocks have performed well during periods of higher energy price spikes.
In conclusion, the current rally in energy stocks presents lucrative opportunities for investors. Despite concerns over war escalation and volatility, energy stocks are expected to continue their strong performance throughout 2024. With oil prices projected to rise and energy firms poised to capitalize on this trend, now is an excellent time to explore stock opportunities in the sector.
Ken Fisher, the founder and executive chairman of Fisher Investments, emphasizes the potential for growth in energy stocks. As a four-time New York Times bestselling author and regular columnist in 21 countries, Fisher’s insights carry weight in the investment community.
