Peters Fundamentally we find it easy to remain bullish across the energy sector as:
the demand rebound outpaces supply growth,
inventory levels are lower than historical averages across
commodities and geographies,
stock valuations are still near historical lows,
commodity prices have showed momentum/strength in the
face of the fourth wave, and
the equities are showing sustaining continued momentum.
Three big differences stand-out today compared to a year ago:
The stocks are actually going up which we have
argued would be necessary to attract capital back, and momentum is continuing with energy off to strong start again in 2022 as the best performer in the S&P 500 YTD.
Commodity prices are now above the 20-year averages in most cases, so it is getting tougher to argue for similar upside in the actual commodity prices compared to a year ago. As stock valuations continue to be near historical lows, it implies that multiple expansion is the best path for further gains in share prices over the next year.
Growth is starting to come back.