“XLE” – the Energy Select Sector SPDR Fund is in the red on Monday after OPEC+ agreed against cutting oil production further that sent oil prices back under $80 a barrel.
What to expect from energy stocks in 2023
For the year, though, oil stocks are still up nearly 60% and that strength is likely to continue in the coming year as well – that’s according to the Global Head of Commodities at Goldman Sachs; Jeff Currie.
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Currie is constructive for one very simple reason – global supply is already not enough and demand will further boost meaningfully once China pulls out of the COVID restrictions.
When you look at high-risk districts, 75% of China GDP is being impacted but we know they’ll get out of it. So, by late Q1 or by Q2, demand is back up, which is why the equities are pricing well.
Russia could retaliate to EU’s ban
Also on Monday, the European Union executed its ban on imports of Russian oil as Invezz reported this morning here. On CNBC’s “Squawk Box”, Currie cited a potential retaliation from Putin in response as another reason to be bullish on oil.
The space in general is very well positioned into 2023. Under investment, the supply pitcher is bleak to say the least, particularly in non-OPEC, ex-U.S. and shales also disappointed. Inventories are incredibly low and we have no spare capacity.
OPEC+ is not scheduled for another meeting until mid-2023. The group, however, confirmed that it was open to an unscheduled meeting to respond timely to how things unfold in the coming weeks and months.
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