Over the last three years, the energy market has experienced intense price volatility. However, it seems that following an extended period of relative weakness, energy stocks are finally on their way to recovery. With crude now back over $50 and natural gas revolving around the pivot point of $3, the panic that swept over the market are all but gone. The incredible turnaround has stoked high expectations from the energy sector going into the penultimate quarter of 2017.

Let’s take a look at how oil and gas prices behaved during the third quarter of this year and what makes the Energy sector a material factor this earnings season.

Q3 Report Card: Prices End on a Positive Note

Oil: The U.S. oil benchmark wrapped up a strong quarter amid continued declines in domestic inventories and an improving supply-demand narrative.

The rapid decline of oil inventories in recent months has helped the U.S. crude market shift from year-over-year storage surplus to a deficit. Moreover, energy bodies OPEC and IEA both recently raised global oil demand forecasts for this year. Also, supply from the 14-member OPEC cartel is set to remain constraint for at least the next six months, helping to tighten the market significantly. Adding to the positive momentum, OPEC and Russia claimed to be on the right track in clearing the global oil glut with half the job done.

With fundamentals pointing to a tighter market, oil ended the third quarter at $51.67 per barrel, up about 10.5% sequentially. A year ago, crude futures hovered around the $45 per barrel mark.

Natural Gas: Natural gas fared badly, dropping about 3.5% in the July-September period, thanks to the fuel’s tepid demand on the back of mild weather conditions and hurricane-related power outages.

Despite the sequential fall, natural gas prices are in a sweet spot compared to the corresponding period of 2016. The commodity futures ended the quarter at $3 per MMBtu, up more than 3% from the Sep 30, 2016, settlement of $2.9 per MMBtu.