If you’ve been a longtime follower of mine, you know how bullish I am on the energy sector.
However, energy stocks are also seasonal.
There are two quarters a year where they’re a little out of sync, and there are two quarters a year they naturally beat. And you’re going to see the energy stocks join the party and become the strongest sector for the next three quarters.
So, in today’s Market 360, we’ll talk more about why I’m bullish on energy. Then I’ll share how to access my new energy recommendation as soon as it’s released.
Crude Oil and Natural Gas Prices Set to Rise
I know what you’re thinking… “Energy prices have moderated recently.” And you’re correct; they have moderated, with crude oil prices trading below $80 per barrel right now. Here are two reasons why oil prices have moderated…
First, it is abnormally warm in Europe, and fears of an LNG shortage have abated given that Europe’s storage levels are full. Second, the American Petroleum Institute recently reported that U.S. crude oil inventories rose by a larger than expected 11.9 million barrels.
I should also add that crude oil demand is typically lackluster in the winter months. Despite this though, crude oil prices are anticipated to climb as global crude oil supplies remain tight.
The U.S. Energy Information Administration (EIA) reports that the U.S. exported more liquified natural gas (LNG) than any other country in the world in the first six months of the year.
The resumption of service at Freeport LNG increased LNG exports by 2.0 billion cubic feet per day in 2023 so far. The EIA also anticipate that the U.S. will export an average 12.2 billion cubic feet of LNG per day throughout the winter, which represents a 10% year-over-year increase.
Saudi Arabia and Russia have also both reiterated that their crude oil production cuts will persist through yearend. The EIA has also noted that the inventories of crude oil and refined products that tend to grow in the winter remain low. So, any flare up in the Middle East could cause crude oil prices to soar.
Also important to note, natural gas and LNG prices tend to rise in the winter – and that’s definitely a possibility this winter. An El Nino weather pattern should make it abnormally cold in the Northeast U.S. and Europe, which will boost natural gas demand and prices. In addition, LNG exports from Egypt to Europe could be disrupted if Middle East tensions escalated and Iran blocked the Strait of Hormuz.
Next Year’s Market Leaders
The bottom line is that crude oil and natural gas prices should remain elevated as we head into the New Year. In turn, energy companies will also likely reassert their leadership, especially as they continue to benefit from tension in the Middle East and the possibility that Russia could halt its crude oil production in the Arctic Circle.
Now, currently the energy sector as a whole is forecasted to post a 37.6% annual earnings decline. Nonetheless, due to easy year-over-year comparisons, plus firm crude oil and natural gas prices, the energy sector should lead the sectors in the S&P 500 for the next three quarters.
So, to further benefit from the turnaround in the energy sector, I am adding a new energy stock with stunning fundamentals in Friday’s Growth Investor Monthly Issue for December. In its third quarter, earnings more than doubled, and they’re expected to jump in the triple digits in the fourth quarter.
Also in the Growth Investor Monthly Issue, I’ll take some time discuss my outlook for 2024 – including four predictions for next year. I’ll say here now that I am expecting a very prosperous 2024!
So, to gain access to my newest energy buy in tomorrow’s Growth Investor Monthly Issue for December, as well as all my past Monthly Issues, Weekly Updates, Special Market Podcasts and Special Reports, join me at Growth Investor today.
(Already a Growth Investor subscriber? Go here to log in to the members-only website.)