Scotiabank strategist Hugo Ste-Marie expects energy stocks to continue outperforming,
“Oil prices have been steadily rising so far this year, with WTI prices now up 14% YTD and crossing the US$80/bbl level for the first time since last fall … solid U.S. economic growth and a rebound in global activity (PMIs are recovering) appear to support demand. In its latest oil market report, the International Energy Agency (IEA) indicated that global oil demand was forecast to “rise by a higher-than-expected 1.7 mb/d in 1Q/24″, while “world oil production is projected to fall by 870 kb/d in 1Q/24″. The U.S. Energy Information Administration (EIA) also points to subdued production growth as a result of OPEC+ extending their supply cuts while demand keeps being revised upward as economic activity surprises ... demand is thus seen outstripping production in 2024 by the EIA, which should be supportive of prices … In the U.S., oil inventories are also down 7% YOY … spot WTI is now trading well above sell-side forecasts over the next few quarters. All else equal, that increases the probability of seeing positive EPS/CFPS revision in the space, which could support outperformance. YTD, TSX E&Ps are up +12.9% vs a gain of +4.2% for the TSX Composite”