Crude oil and gas prices are expected to remain higher in the upcoming months due to robust demand worldwide and tight supplies, boosting the energy sector’s growth prospects. Therefore, quality energy stocks Energy Transfer LP (ET – Get Rating), CVR Energy, Inc. (CVI – Get Rating), and Euronav NV (EURN – Get Rating) could be solid buys, all trading under $35.
The Organization of the Petroleum Exporting Countries (OPEC) forecasts world oil demand to rise by 2.44 million barrels per day (bpd) to average 102.1 million bpd in 2023. Next year, global oil demand is expected to grow by 2.25 million bpd. Developing economies, led by China, will account for most of this year’s demand growth, OPEC said in its Monthly Oil Market Report (MOMR).
Further, U.S. natural gas output and demand will likely hit record highs this year. The U.S. Energy Information Administration (EIA) projects dry gas production to grow to 103.72 billion cubic feet per day (bcfd) in 2023 and 105.13 bcfd next year, compared to 99.60 bcfd in 2022. The agency also forecasts domestic gas consumption to rise to 89.17 bcfd this year from 88.46 bcfd in 2022.
Soaring global demand for oil and gas and production cuts have sent oil prices to unprecedented levels since August last year. The Brent crude oil price averaged nearly $94 per barrel in September, $8/b higher than in August and up $19/b from June. Oil prices surged significantly last month after Saudi Arabia and Russia extended voluntary oil output cuts through the year-end.
Also, U.S. commercial crude oil inventories fell to the lowest level since early 2022 at the end of September, driving crude prices higher.
EIA expects crude oil prices to rise in the coming months, reflecting its expectations of tightening balances in world oil markets. Moreover, the ongoing war between Israel and Hamas raises the potential for oil supply disruptions. In its October Short-Term Energy Outlook (STEO), the agency expects the Brent spot price to average $91/b in the fourth quarter of 2023.
In addition, EIA forecasts the Brent spot price in 2024 to average $95 per barrel, $7 per barrel higher than in the previous month’s STEO.
Considering these favorable trends, let’s take a look at…
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