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Big oil is hit, but its investors are highly valued

Consider some of the recent performance figures.

Six of the top 10 performers in this year’s S & P 500 are energy companies led by Marathon Oil, whose value has almost doubled in 2021 alone. S & P 500 energy companies outperform other broad market slices, up nearly 41% in 2021, compared to about 12% of the total stock market benchmarks.

Despite popular punishment, boosted by rising oil prices, stock returns at major energy companies were extraordinary. Shown as a percentage of typical price increases from 2021 to Thursday.

US crude oil prices exceeded $ 70 a barrel, the highest in three years. Oil is said to have risen nearly 40% annually, well above the price of regular gasoline in pumps by well over $ 3 per gallon. AAA..

The main short-term reason for rising prices in the energy sector is the classic reason. That is, a simple imbalance between supply and demand.

“Some of this is what happens to the energy markets when the economy grows after a recession,” he said. Ed Croux, Vice Chairman of Energy for the Americas of research firm Wood Mackenzie.

Demand surged as the economy awoke from a pandemic downturn.

At the same time, the oil supply recessionWhen people stopped driving and flying and major oil companies lost billions of dollars and began to shrink. Supply was also tightened by restraints exercised by the Organization of Petroleum Exporting Countries and a group known as OPEC Plus, which consists of producers from allies such as Russia. OPEC Plus is already Announcement Its members have begun to increase production a bit, which can prevent prices from rising further.

However, the long-term supply and demand situation is much darker.

At some point, if we accept that the planet is warming, that is, if we accept the scientific verdict embedded in the International Energy Agency’s report, we need to stop extracting large amounts of carbon. Public pressure on major oil companies may signal a decline in fossil fuel production. The potential for future supply constraints weighs heavily on the market and can have a slight impact on prices, Crooks said. The oil market has always been tied to geopolitics, but it could become even more challenging in the next decade.

A company based in Europe, Any, total And BP, Following Shell, he pivoted faster than American companies preferred towards the future of alternative energy and the reduction of carbon emissions. ConocoPhillips, According to Chevron and Exxon New research By Carbon Tracker, an independent think tank.

Big oil is hit, but its investors are highly valued

Source link Big oil is hit, but its investors are highly valued

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