The energy sector performed well last year, thanks to high oil and natural gas prices arising from the war between Russia and Ukraine. Energy stocks are expected to gain momentum due to increased travel demand, supply constraints, production cuts, and an anticipated recovery in the Chinese economy.
Therefore, investing in fundamentally strong energy stocks could be prudent. Amid this backdrop, it could be wise to invest in energy stocks Graham Corporation (GHM – Get Rating), Geospace Technologies Corporation (GEOS – Get Rating), and Profire Energy, Inc. (PFIE – Get Rating).
Before diving deeper into the fundamentals of these stocks, let’s discuss why the energy industry is expected to perform well.
Last year, the energy sector outperformed other sectors as high demand and tight oil and natural gas supplies pushed up the prices of these essential commodities. Oil prices have been rising lately amid output cuts by OPEC+ and increasing global demand. After beginning to limit supplies in late 2022, the OPEC+ in June this year extended supply cuts into 2022.
Energy prices have pulled back from last year’s peak, but robust summer travel demand and limited supply due to production cuts by major exporters are helping boost oil and gas prices lately. This could be advantageous for energy companies and related businesses.
In its monthly oil market report, the IEA said, “Deepening OPEC+ supply cuts have collided with improved macroeconomic sentiment and all-time high world oil demand.” The IEA expects oil demand to expand by 2.2 million bpd this year to reach 102.2 mb/d, driven by summer air travel, enhanced Chinese petrochemical activity, and the growing use of oil to generate power.
The possibility of rate cuts by the Fed next year and a revival of the Chinese economy are some key triggers to look out for, which could further boost energy prices this year.
Considering these conducive trends, let’s analyze the fundamental aspects of the featured stocks within the Energy – Services industry, starting with number 3…
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