Energy stocks are cyclical, which means these companies perform extremely well during periods of economic expansion, and trail the markets significantly during recessions. After touching multi-year highs in 2022, energy stocks pulled back significantly last year, due to a challenging macro backdrop.
But a resilient job market has helped oil prices move higher on a year-to-date basis. And more recently, crude futures (CLK24) rallied after an International Energy Agency (IEA) report indicated that oil markets are likely to face a supply deficit for the rest of 2024, due to the possibility of production cuts from OPEC+.
