Oil prices have lately lost their forward momentum, with both Brent and WTI crude plunging this week. A rather puzzling trend is being observed in the oil markets: there’s a big disconnect between inventory data and oil prices.
So, we can see that oil and gas stocks remain dirt cheap even after last year’s massive runup, thanks in large part to years of underperformance.
The analysts note that commodity prices have declined from very high levels earlier in 2022, but have predicted that prices are likely to remain cyclically strong through 2023. This, combined with modest growth in volumes, will support strong cash flow generation for oil and gas producers. Moody’s estimates that the U.S. energy sector’s EBITDA for 2022 will clock in at $$623B but fall to $585B in 2023.
In other words, there simply aren’t better places for people investing in the U.S. stock market to park their money if they are looking for serious earnings growthBut the biggest reason to be bullish about the sector is that the current oil surplus is likely to morph into a deficit as the quarters roll on.
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