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Energy stocks shake off pandemic losses to flourish amid air travel resurgence

Energy stocks shake off pandemic losses to flourish amid air travel resurgence

Increasing global travel and continued economic recovery have propelled the energy sector to emerge as the biggest gainer over the last three months after the coronavirus pandemic shuttered the industry in 2020.

The three-month relative stock performance places energy in the pole position with 11.75% in gains. Other stocks trading in the green zone over the last three months include basic materials, industrials, financial at 11.73%, 11.39%, and 10.73%, respectively. 

The sector’s resurgence is essentially due to the lifting of strict lockdown measures following the rollout of the Covid-19 vaccines. In addition, the oil demand is rising as more people resume air travel. For instance, in the U.S., domestic travel has surged at least six-fold since May 2020.

FInviz.com data.

Last year, energy stocks crashed amid an excess supply of oil due to lockdowns. However, the sector’s resurgence indicates that producers manage supply since demand is yet to peak, considering not all countries have reopened. At the same, supply is expected to be contained, with producers slowing down discovering new wells. 

Furthermore, the sector received a boost as most parts of North America emerged from the winter season. Historically, winter has resulted in more demand for liquid natural gas. Elsewhere, renewable stocks are emerging as a critical player in the industry following President Joe Biden’s plan to speed up the transition from fossil fuels. 

The recovery of the sector is highlighted by significant players like ConocoPhillips posting impressive Q1 results

Moving forward, like other stocks, the energy sector also risks suffering corrections, especially if supply increases. Additionally, the renewed decarbonization debate might spell doom for the sector. But, in general, energy stocks still have the potential for attaining the pre-pandemic levels as countries resume normal operations. 

Technology erases 2020 gains

On the flipside, after leading the stock market resurgence in 2020, the technology sector is trading in the negative, with three-month relative performance standing at -5.7%. 

Analysts believe the sector is a casualty of inflation worries alongside the speculated increase in interest rates by the U.S. Treasury. 

Interestingly, the plunge in tech stocks comes after most companies posted record Q1 2021 results beating analysts’ projections. The results highlight the role played by the tech companies in helping people maneuver the coronavirus pandemic. 

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