Forget Tech Stocks, Make Profits from Energy Sector in 2021

While last year’s winners from the tech sector have still been suffering to trade in the green, the last year’s laggard energy sector is leading the 2021 rally – driven by surging oil prices and robust growth in oil demand. Companies engaged in oil and gas-related activities saw massive losses in 2020 due to the historic slump in oil demand after governments all over the world imposed lockdowns and social distancing practices.

The S&P Energy Index rallied almost 27% since the beginning of 2021 compared to the broader market index growth of just over 4%. What’s more, the second-best performing financial sector, which is up 13.5% year to date, is still down almost twice from energy sector gains.

Marathon Oil (NYSE: MRO)  is the largest gainer among energy stocks followed by Occidental Petroleum (NYSE: OXY), DiamondBank Energy, Hollyfrontier, and Apache.

More Gains are Ahead for Energy Sector

The market analysts are optimistic that the energy sector will gain more upside momentum during the second and third quarters on the back of a stronger commodity price outlook. Crude oil prices are currently trading around $65 a barrel after falling into a negative range last year.

Meanwhile, Goldman Sachs believes crude oil price will hit $70 in the second quarter and extend the momentum to $75 a barrel during the third quarter.

Goldman Sachs said:

Faster re-balancing during what was expected to be the dark days of winter will be followed by a widening deficit this spring as the ramp-up in OPEC+ production lags our above-consensus demand recovery forecast.”

Bank of America and Barclays also see strong future fundamentals for the energy sector in 2021 as lower oil production along with increasing demand.