Bullish investors argue that energy stocks are still cheap by historical standards - and far less richly valued than other areas of the market. The energy sector currently trades at a forward price to earnings ratio of 12.2, well below its historical median forward P/E of 15.3, according to LSEG Datastream. The S&P 500 trades at a forward P/E of 20.
Meanwhile, drillers have been taking rigs offline, contributing to what is widely seen as a tight market, while Russia and Saudi Arabia haveThe U.S. rig count is about 16% below where it was this time last year, according to data from U.S. energy services firm Baker Hughes. Overall, U.S. oil output from top shale-producing regions is on track toin a row in October to the lowest level since May, the U.S. Energy Information Administration said.
Citi on Monday became one the latest banks to predict that global benchmark Brent crude could exceed $100 a barrel this year. Energy demand could suffer if a rebound in the economy of top commodity consumer China fails to materialize. A 2024 recession in the U.S. - which many strategists still view as a possibility despite growing hopes of a soft landing, could also weigh on oil prices.