Now is the most profitable environment for the energy space that we’ve seen in years, says Paul Sankey. The Energy Select Sector SPDR Fund is up 40% for the year.
Sankey’s remarks on CNBC’s ‘Power Lunch’
According to the lead analyst at Sankey Research, the sector is massively undersupplied, which makes the case that the strength in XLE will likely sustain. On CNBC’s “Power Lunch”, he said:
At the moment, we’re not seeing demand destruction. Today, OPEC increased production target. But in reality, over the past month, against a 400,000 barrel increment target, they added 30,000 barrels. That’s how undersupplied these markets are.
He’s bullish across the board on oil companies, especially the likes of Exxon Mobil Corp that also combine refining. On the LNG front, he likes the Oklahoma-based Chesapeake Energy Corporation.
Why else does he like energy stocks?
A day earlier, the European Union said it will shun all oil and natural gas from Russia over the next year, which, as per Sankey, is all the more reason to own American energy companies. He noted:
It’s a huge deal. Russia is a major natural gas and oil exporter. The loss of Russia, which is going to get more and more fed through into the markets, is enormously important for American exporters of both oil and natural gas.
The oil and gas expert forecasts energy to be 10% of the S&P 500 versus 4.0% at present. The one area within this space that he’s less bullish on is “services”.
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