In this episode of Research in Action, Research Analyst Noah Barrett explains what’s behind the recent rally in energy stocks and why he thinks supply/demand dynamics for crude in the post-pandemic economy will likely be supportive of the sector.

Key takeaways

  • Even as oil demand rebounds from the lows hit during the pandemic, supply has lagged as a result of under-investment in new production, geopolitical tensions and capital discipline among companies.
  • The imbalance has put upward pressure on crude prices and could continue to do so, especially if peak oil demand isn’t reached until 2030 or later and companies limit production growth, as we expect.
  • Even so, we think the sector still trades at a discount to its long-term growth prospects, reflecting investor skepticism about the current energy cycle and worries about potential near-term headwinds, such as rising interest rates.

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