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The Key Takeaways
- Wall Street had expected that energy would be the sector which outperformed all others this year following a tough 2023.
- Oilfield services providers SLB and Halliburton, along with oil producer APA Corp., were some of the S&P 500 stocks analysts forecast to rise the most this year. They all dropped more than 28.8%.
- Oil prices were pressured in 2024 by record U.S. production and sluggish demand in China, one of the world's largest crude consumers.
Wall Street analysts are not exempt from this rule.
According to a December 2023 analysis by FactSet Research, analysts expected energy stocks in the S&P 500 to rise by more than 25% this year, about double the expected return of the next-best performing sector. Three of the 10 S&P 500 stocks that analysts were the most bullish on the cusp of the current year were in energy: oilfield services providers SLB (SLB) and Halliburton (HAL), and oil and gas producer APA Corp. (APA).
Wall Street was not pleased with the results. The sector has lagged behind the market for the second consecutive year. Of the industries tracked by an S&P Global index, oilfield services and oil & gas exploration are the two worst performers in 2024, down 12% and 9%, respectively, through Friday's close. The three companies mentioned above all have seen a decline of more than 28 % this year.
The oil price will fall in 2024 due to low supply and high demand.
This year’s oil prices have been impacted by a robust supply of crude and weak demand, causing a blow to companies who drill for it. OPEC+ – the Saudi petroleum cartel – has continued to cut production, which was first done in 2023. However, these cuts were offset by record U.S. production and a slowdown of the Chinese economy.
The oil industry is not expecting much improvement in the coming year. U.S. Energy Information Administration forecasts that crude prices in the US will average 6% less next year, as drillers increase production up to 13.5 million barrels per day.
Wall Street still expects the shares of these three oil companies to see significant gains by 2025. APA’s median 12-month target price is approximately 33% over its stock price at the end of December. Analysts expect SLB’s shares to increase by 48% and Halliburton’s to grow 39%.
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