United States – Oil prices show a distinctive detachment from the energy stocks. The current disconnect has not been witnessed since 2006. However, shareholders stay bullish on the energy sector as companies settle strong dividends.
Oil stocks continued to display a weird disconnect in the US stock market from the product they track. Oil equities presented a powerful demonstration even as oil prices dropped steeply since the previous OPEC meeting. In the previous two months, the energy sector’s most important benchmark, the Energy Select Sector SPDR Fund or NYSEARCA: XLE, increased 34%, while average crude spot prices dropped 18%. XLE brags a 61.2% return in the YTD or year-to-date, the best of any market segment in the US or the United States.
As per Bespoke Investment Group, the recent split indicates the first time since 2006 that the gas and oil sector traded within 3%, which is at a 52-week high. On the other hand, WTI price fled over 25% from the respective 52-week high.
The US oil majors satisfied the traders in the previous two months. Exxon Mobil Corp earned 35.3%, as well as Chevron Corp, with a boost of 30.6%. ConocoPhillips also earned 30.1%, Philips 66 railed 45.3%, and Marathon Petroleum Corp bounced back to 40.3%. The trend is in a shorter timeframe, with all the stocks being in the green in the past five exchange sessions.
Strong earnings by energy companies are why investors flock to oil stocks. The Q3 earnings are finally over, yet it’s shaping to be a better-than-feared one. As per the earnings insights of FactSet, 94% of the S&P 500 companies reported Q3 2022 earnings, which report 69% positive EPS, and a revenue of 71%.
The Energy sector reported the highest earnings growth of all sectors at 137.3% compared to the S&P 500, which is 2.2%. All five sub-industries in the sector reported over a year boost in earnings. Oil & Gas Refining & Marketing at 302%, Oil & Gas Exploration & Production at 107%, Oil & Gas Equipment & Services at 91%, and Oil & Gas Storage & Transportation at 21%.
Energy is also the sector in the US stock market, with many companies beating the estimates in Wall Street, which is at 81%. The revenue of marathon Petroleum shocks the traders at $47.2 billion against $35.8 billion.
The trading experts note that product prices dropped from high levels in 2022, yet these expected prices will likely stay cyclically strong throughout 2023. Since oil and gas prices dropped from their recent highs, these are still higher than the price they traded in the past years, which is why there’s ongoing enthusiasm.