A blazing U.S. stock market rally left shares of energy companies behind in the first six months of 2023 as faltering global growth sapped expectations of oil demand. Some contrarian investors are betting a second half rebound may be in the works.
“We don’t have a recession as our base-case scenario in the U.S., so we think there is scope for the laggards to catch up,” said David Lefkowitz, senior equity strategist at UBS Wealth Management. “Energy is at the top of that list.” Oil markets have shown signs of growing tighter. U.S. drillers cut the number of operating rigs last week for the eighth week in a row, putting total rigs in service down 9 per cent over the course of the year to the lowest since April 2022, according to Baker Hughes.
Betting on a rebound in energy stocks remains very much a contrarian play in a market whose march higher has been led by a handful of giant tech and growth stocks.