Energy companies rebounding after disastrous 2020

Energy companies spent the first quarter of 2021 recharging from a draining year. Wall Street expects that growth to continue as energy companies and many of the other companies beaten down by the virus benefit from the vaccine push aimed at bringing the pandemic to an end.

Marathon Oil, ExxonMobil and other stocks in the sector have jumped as the economy recovers from the virus pandemic, driving demand for oil.

Analysts polled by FactSet expect the energy sector to make overall stock gains of up to 45% this year, based on current median target prices. That would make the sector the biggest gainer of the year, far outpacing 20% gains expected in the technology sector.

The energy sector is already the biggest gainer in the S&P 500 so far this year, rising nearly 30%, while the broader index is up only about 5%. The gains mark a sharp turnaround from last year, when the sector shed 37% of its value as people stopped traveling and commuting to work. Their profits disappeared, with many swinging to a loss.

OPEC is also maintaining its production cuts to support prices as demand recovers. It cut production by 9.7 million barrels per day after the pandemic hit last year, but eased that to 7.7 million barrels per day by the end of 2020.

That’s helped lift oil prices 20% in 2021, a sharp turnaround from last year’s 20% drop. Oil prices are now back to pre-pandemic levels.

Marathon Oil told investors in February that even if stronger crude oil prices hold, it will continue to focus on its cash flow and cost cuts. ExxonMobil says it is also pacing its investments to build up a cash cushion. Read the full analysis.