Energy Stocks Fail to Lure Retail Investors Despite Oil Rally

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Energy stocks have failed to capture the imagination of retail traders as individual investors sit out the rally — despite exhortations by top Wall Street strategists to jump in.

That might be because energy equities have struggled to keep pace with skyrocketing oil. The S&P 500 Energy Index has jumped about 14% since late June, but oil prices have outstripped the sector over the same period soaring roughly 30% to top $93 a barrel — a 15-month high — driven by OPEC+ supply cuts and the promise of increasing demand as the outlook for the world’s biggest economies improves.

Even calls for oil at $100 a barrel has not been able to draw generalists into oil and gas stocks. “Rather than chasing the rally in energy stocks, retail investors are currently exhibiting caution,” Vanda Research analysts led by senior vice-president Marco Iachini wrote in a Sept. 14 note. Some of the divergence can also be traced to struggles at specific large-capitalization oil stocks, like Chevron Corp., which accounts for 17% of the S&P 500 Energy Index. The stock has fallen over 7% year to date, weighted down by concerns over a strike at a major LNG project in Australia and disappointing production growth.

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