Crude oil prices may have surged back above US$33 in recent days, bringing a new wave of enthusiasm to Canadian energy stocks, but market watchers are still divided on what direction the sector will head next.
That enthusiasm spilled over into Canadian oil stocks as the S&P/TSX Capped Energy Index has rallied 25 per cent since WTI prices bottomed. On Tuesday, names like Suncor Energy Inc., Canadian Natural Resources Ltd. and Cenovus Energy Inc. each closed more than four per cent higher. Any other positive news that suggests society may be closer to returning to pre-COVID-19 function — a vaccine or treatment for the virus that looks promising, the lifting of lockdown restrictions or a pick-up in air traffic — could continue to fortify oil prices, he said. He expects prices to hold in the US$30 range for the next few months and hit US$50 in 2021.
There’s risk associated with names across the sector, he said. Some of the small caps are among the worst year-to-date performers, but their balance sheets are often problematic and liquidity is a concern. While that is currently less of an issue for large caps like Suncor and Canadian Natural Resources, they’ve accrued negative cash flow throughout the crisis and therefore their balance sheets won’t emerge from it with the same position of strength.
They'll be fine
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