In recent days, under the influence of multiple factors such as the interruption of Libyan crude oil supply and the intensification of geopolitical risks in the Middle East, international oil prices have experienced a short-term upward trend.
However, mainstream investment banks on Wall Street still believe that international oil prices will not soar significantly in 2024, and the outlook for US energy stocks remains bleak this year.
In 2023, the energy sector was already the second worst performing sector among the 11 constituent sectors of the S&P 500 index. For energy investors, Wall Street's latest expectations will undoubtedly further undermine their confidence.
The future of oil prices is not optimistic
On Wednesday Eastern Time, against the backdrop of tensions in the Middle East and production stoppages in Libya, crude oil prices and US energy stock prices both surged.
But on the same day, Mizuho Securities downgraded the ratings of eight oil and gas producers and significantly lowered the target prices of several other oil and gas producers. This indicates that Mizuho is not very optimistic about the future prospects of energy stocks and oil prices.
Mizuho analysts emphasize that despite increasing geopolitical tensions, the prospect of abundant oil supply will still prevent a significant increase in crude oil prices.
Despite the rise in oil prices on Wednesday, Nitin Kumar, an analyst at Mizuho, is not particularly concerned about this. His evaluation of the recent rise in oil prices is simply:; Quota; There will always be ups and downs in the days& Amp; Quota;
He added that it is expected that global oil production will maintain sufficient market supply this year. "Forget the noise, stick to the fundamentals, and you will eventually stand on the right side."
There is limited room for oil prices to rise this year
Mizuho believes that oil prices will generally remain volatile throughout 2024. JPMorgan analysts also predict that given "sufficient physical supply," there is limited room for crude oil prices to rise.
Although geopolitical concerns will be the main driving force behind the rise in oil prices, mainstream Wall Street investment banks overall still emphasize that the growing crude oil production of non OPEC+countries may exceed global demand.
Stacey Morris, head of energy research at VettaFi, stated that "there is not much oil story" supporting the industry's stock price rise.
At present, international crude oil prices fluctuate within the range of around $70 per barrel, and Morris predicts that "oil prices will continue to hover at this level.",
The technical performance is also poor
Technically speaking, the current outlook for energy stocks is also poor: the ratio of the S&P 500 Energy Index to the S&P 500 Index shows a bearish technical signal, indicating that energy stocks will perform even worse.
On Tuesday, Anthony Feld, Senior Technical Strategist at Commercial Bank of the UK, and Gina Martin Adams, Director of Equity Strategy, wrote in a report that from a technical perspective, another unfavorable factor is that the ratio forms a so-called "dead end crossover", with its 50 day moving average lower than the 200 day moving average.
Starting from mid January, US oil and gas producers will gradually release their fourth quarter financial reports. Bloomberg compiled data shows that Wall Street analysts expect the US energy industry's earnings to decline by 28% compared to the same period last year. Overall, the profit growth performance of the industry in the fourth quarter will be the weakest among all industries in the United States.