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  • Roger S. Conrad

Quality is Still King in the Energy World

By Elliott H. Gue on May. 31, 2020

Energy stocks have rallied hard in the month of May. The S&P 500 Energy Sector Index is now up more than 70 percent from its March 18 low. The super majors-focused NYSE Arca Oil Index (NYSE: XOI) is higher by 82 percent plus. And the midstream-heavy JP Morgan Alerian MLP Index ETN (NYSE: AMJ) is now better by 140 percent.

None of these indexes is as yet anywhere close to where it started the year. The S&P Energy Index is 60 percent under its all-time high in mid-2014, the last time oil sold for more than $100 a barrel.

True, benchmark WTI Cushing crude will run you about one-third of that now. The same is true for natural gas at Henry Hub, and prices are lower still at hubs in Appalachia and Canada. Unlike oil, gas has not rebounded appreciably from the March low.

Our view remains the spring rally in commodities has limits in the near term. But energy stocks don’t need higher oil and gas prices to rally now. And that’s especially true for refiners, as they benefit from a rapid recovery in driving as Americans opt out of mass transit.

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    • Elliott H. Gue

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor

    • Roger S. Conrad

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor