The energy sector’s outlook looks promising amid elevated summer travel, uncertain geopolitical conditions restricting supplies, and production cuts. Given this backdrop, quality energy stocks HF Sinclair Corporation (DINO – Get Rating), ARC Resources Ltd. (AETUF – Get Rating), and Weatherford International plc (WFRD – Get Rating) could be prudent investment opportunities now.
The removal of pandemic-related international travel restrictions led to a surge of Americans embarking on foreign trips. Planned air arrivals for July and August of 2023 skyrocketed by an impressive 14.4%, surpassing 2019 levels by approximately 5%. The escalated international air travel has spurred airlines to augment their fleet size with larger aircraft, and jumbo jets are being reestablished to manage burgeoning airport congestion.
Energy analysts at Capital Economics have identified jet fuel as the principal component propelling oil demand growth in 2023. International Air Transport Association (IATA) forecasts global jet fuel consumption to rise by nearly 15% in 2023 to 7.3 million bpd.
As per the latest data by the Joint Organizations Data Initiative (JODI), the global oil demand witnessed a notable upsurge by more than 3 million barrels per day (bpd) in May 2023, compared to April, largely driven by a demand surge in China, coupled with uplifts noted in India, Saudi Arabia, and the United States.
Additionally, OPEC’s latest Monthly Oil Market Report shows that crude oil demand is expected to hit 29.4 million bpd in 2023, marking an increase of 100,000 bpd from its previous forecast.
Moreover, coupled with the sweeping oil production cuts by the world’s largest oil exporters, Saudi Arabia and Russia, Saudi Arabia’s decision to extend its unilateral production cut has effectively tightened the market and could push the prices up. Unforeseen supply disruptions emanating from regions like Libya and Nigeria further bear the potential to escalate crude prices going forward.
Furthermore, amid increasingly bullish fundamentals, ING strategists said, “A break above $80/bbl would see the market finally breaking out of the $70-80/bbl range that it has been stuck in for more than two months.” Also, as per the U.S. Energy Information Agency’s Short-Term Energy Outlook, crude oil prices are anticipated to reach about $80/b in the fourth quarter of 2023 and about $84/b in 2024.
Given the tailwinds…
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