A market mystery: Energy stocks are still riding high even as crude oil tumbles

One side is wrong. There is a huge divergence that has developed between energy stocks and crude oil. Crude oil is 40% below its peak in March of this year, yet energy stocks are far and away the best performing sector in the S & P this year, up 62% and only 4% off the highs it hit a few weeks ago. Why the huge disparity? Energy bulls insist supplies will remain tight and oil prices will likely be higher in 2023.

So who's winning? For the moment, it looks like the bulls are winning: Energy stock prices remain elevated, suggesting investors are optimistic about 2023. "The P/Es of most of the oil companies remain attractive, on a valuation basis, especially if you believe demand will ramp up and take oil prices with it next year," Kilduff told me. One additional wildcard: China. Whether China reopens or remains subject to variable lockdowns could have a big effect on oil prices.

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