Energy ranked on top in S&P 500 again in October; Read the details below

Energy ranked on top in S&P 500 again in October; Read the details below

Best Performers

The S&P 500‘s second-best performer, slightly behind consumer discretionary, gained 10% in October, bringing its year-to-date gain to 52 percent.

Due to rising oil prices, industry titans Chevron and Exxon both posted better-than-expected profits on Friday morning. Earlier this week, West Texas Intermediate crude hit its highest level since October 2014.

The sector was up again on Monday, ahead of an important OPEC+ meeting this week, at which the group will decide on future output plans.

According to Federated Hermes portfolio manager Steve Chiavarone, the underlying commodity should continue to rise, lifting the energy trade even higher.

“We had a wild call of $90 for WTI at the beginning of the year, and we still think that’s where we’re going,” Chiavarone told reporters on Friday.

The Past Records

WTI crude began the year below $50 a barrel and closed above $84 a barrel on Monday. It reached an all-time high of $85.41 earlier this week. These new highs contrast sharply with last year’s precipitous drop in oil prices – one contract, for example, fell negative for the first time in history.

“Any time oil prices went to $60 in the last seven years, the Texans stepped in, turned on the spigot, and it moved you back down to $40,” Chiavarone added. “It’s more difficult for them to accomplish it.” There has been underinvestment in recent years, no demand last year, and regulatory changes with the new administration. Activist investors are now disincentivizing exploration and production, so all of this means that Texas supply isn’t just flowing into the market.”

In terms of the OPEC+ meeting on Thursday, Chiavarone does not expect a significant adjustment in strategy that would signal a significant change in oil’s rising trend.

The Last Five Years

“If you look at the chart over the last five years, you can see a fantastic downtrend reversal, with a succession of higher highs and higher lows being formed with this exact setup.” And any sort of short-term downturn in here, from our standpoint, we’d be buying,” Johnson added in the same interview.

Piper Sandler’s chief market strategist, Craig Johnson, believes the stock will continue to rise. According to him, the technical setup for the XLE energy ETF appears to be positive.

The next region of resistance, according to Johnson, is $62 to $64, with the ETF trading over $58 on Monday.

According to Johnson, oil is also poised to continue climbing. He believes WTI crude can outperform Chiavarone’s target.

Nearing the winter months, and understanding the oil chart, it seems that we could witness oil over the $90 mark,” Johnson said. It might range from $110 to $115 range.

Johnson’s bottom end of $110 is a 31% increase over current crude prices.

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