From Morningstar:

Energy stocks gained 13.3% despite the sector’s 8% loss in the fourth quarter. Around 31% of energy stocks are trading at a 17% discount rate compared to fair value, offering investment opportunities. However, concern over oil demand and supply issues are causing investor hesitation.

Lower demand for gasoline in the US is negatively impacting oil demand, with concerns over supply also causing worry for investors. Diplomatic activity with Venezuela has led to potential increases in oil production to ease supply issues. Concerns about Iran’s involvement in the Israeli-Hamas conflict have not materialized, leading to a potential increase in global oil supply.

In the gas market, investors are focusing on supply interruptions, temperature drops, and the Israeli-Hamas war’s potential repercussions. Despite gas stock levels being full, EU gas prices and spreads continue to be volatile. Gas prices are expected to remain volatile until new supply from the US is added at the end of 2024.

Investment opportunities in energy include Exxon Mobil, which is discounted about 20% compared to its fair value. Equitrans Midstrean has the potential for significant improvement with the Mountain Valley Pipeline project, while APA has large drilling opportunities in the Permian Basin and the potential to double production in Suriname.



Read more: Energy Stocks Look Cheap, But What Should I Buy?