The sector has been inversely correlated with the rest of the market while the war in Ukraine dominates the macroeconomic landscape–sanctions that are good for oil producers are detrimental to the rest of the economy. Crude oil prices settled at 14-year highs at $123.70 per barrel on March 8 after the U.S. and U.K.
But even if Ukraine and Russia negotiate a settlement to end the fighting soon, Niblack and other experts still see tailwinds that could bolster the stocks of oil and gas producers. The European Union, which relied on Russia for 45% of its gas imports and about 25% of its crude oil purchases in 2021, pledged last week to cut imports of Russian oil and gas by two-thirds this year and cease all imports by the end of the decade.
“I think investors wrongly saw these companies as part of an industry without a future, companies that lacked a terminal value,” says Sean Fieler, chief investment officer of $700 million hedge fund Equinox Partners. “There was a lot of ESG-driven pessimism about the sector that just doesn't conform with the underlying supply and demand fundamentals.”