At the dawn of this year, energy stocks have surged to prominence in the U.S
markets, shining brightly as they outperformed the broader indices significantlyWith a gentle uptick in oil and natural gas prices, energy stocks embarked on an upswing from the beginning of 2025. The energy sector within the S&P 500 has risen by 2.8% this year, while the broader index managed only a modest increase of 0.6%. This stark difference underscores the vigorous momentum of energy stocks at the year's outset, especially when juxtaposed against the sluggish performance of the sector over the past two years.
BTIG analyst Jonathan Krinsky highlighted in a recent research report that energy is expected to be the third-worst performing sector in 2024. He pointed out that the energy sector was the only industry to report losses over the past two years while the overall market surged by an impressive 53%. However, tides have turned, and energy stocks are now riding a wave of recognition
Krinsky remarked, “While it’s still too early to claim this isn’t just a cyclical rebound at the beginning of the year, we are indeed impressed with the natural gas companies that have showcased clear leadership throughout this upward movement.” He noted specifically companies like Antero Resources, EQT Corp., and Expand Energy, which have emerged as significant players driving up energy stock valuations.
Over the past few months, natural gas futures have experienced a notable surge, attributed to several intertwining factorsWeather has played a crucial role, as nature seemingly activated a “freeze mode,” with severe cold conditions far exceeding prior meteorological predictionsIn such biting cold, the demand for heating soared dramatically as households sought warmth and businesses required sustainable temperatures to operate effectively
Natural gas, being the most widely utilized heating source globally, faced a precarious supply-demand imbalance, causing prices to soar in response to this spike in demandLooking at the international market through a macro lens, the appetite for liquefied natural gas (LNG) continues to heat up, with Europe being at the center of this demand surgeDespite efforts over time, Europe's energy shortages remain unresolved, leading governments to scramble to secure essential supplies, thrusting their procurement of natural gas into overdriveThis move not only addresses immediate energy needs but sends ripples through the market, greatly enhancing expectations for natural gas demand and subsequently driving prices higher.
In tandem with this, steady economic growth worldwide is elevating living standards and driving up electricity demand
In today's era of advocating for sustainability and green initiatives, natural gas’s clean and efficient nature has allowed it to find an increasingly prominent place in the power generation arenaThe surge in gas-fired power plants showcases this trend, as both infrastructure and the portion of natural gas utilized in power generation steadily rise, further propelling prices upward.
Rob Thummel, a senior portfolio manager at Tortoise Capital, emphasized that “by 2025, the intersection of technology and energy sectors will drive a decrease in oil demand while simultaneously increasing demand for natural gas by billions of cubic feet.” His insight reflects a shifting energy market structure where advancements in technology and the need for energy transition render natural gas increasingly pivotal
Despite predictions from some Wall Street analysts stating that increased oil supply could pressure crude prices this year, current trends show strong energy demandAs of Thursday, West Texas Intermediate crude rose approximately 1%, holding above $74 per barrel, while Brent crude traded near $77. Both contracts have seen respective increases of approximately 10% and 8% since early December, indicating a relatively tight supply-demand dynamic in the energy sphere.
Among the oil giants, ExxonMobil seems out of sync with the industry rebound that began in early 2025. The company recently lowered its earnings forecast primarily due to decreasing refining profits linked to falling crude pricesYear-to-date, ExxonMobil’s stock has dipped just shy of 1%, standing in contrast to the robust uptick seen across the energy sector