Over the last three years, the energy market has witnessed extreme volatility in terms of pricing. However, with crude now trading at over $60 per barrel, it seems that energy stocks are finally on their way to recovery. Needless to say, such favourable developments have buoyed investors’ optimism surrounding the sector’s fourth-quarter results.

Q4 Progress Report: Energy Treads on Growth Trajectory

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

Oil stockpiles have shrunk in 32 of the last 40 weeks and are down almost 114 million barrels since April 2017. The gradual decline helped the U.S. crude market shift from year-over-year storage surplus to a deficit. At 419.5 million barrels, current crude supplies are 13.2% below the year-ago period and the lowest since 2015.

The U.S. oil benchmark saw an uptick of nearly 17% last quarter as rounds were made that OPEC and other major producers will likely expand their output-cut deal beyond March 2018. True to the predictions, the coalition prolonged the current dynamic for another nine months to the end of 2018. The agreement, now renewed twice, keeps 1.8 million barrels a day (or 2% of global supply) off the market in an attempt to clear a supply glut.

With fundamentals pointing to a tighter market, oil ended 2017 at $60.42 per barrel — the first settlement above $60 mark since June 2015. A year ago, crude futures hovered around the $53 per barrel mark.

It goes without saying that all oil-related stocks are thus poised to benefit from recovering commodity prices as they will be able to extract more value for their products.

A General Review of the Energy Space

The Oil/Energy sector had put up a stellar show in the July-September 2017 period. Earnings for the sector recorded a massive 152.3% jump from the year-ago period — the highest among the 16 broad Zacks sectors — on 19.3% higher revenues.