- The S&P 500’s Energy Index popped as much as 5.5% Monday, its best day since October.
- Energy stocks were the top 10 gainers in the benchmark index in Monday’s session.
- The price surge follows OPEC+’s surprising decision to slash oil production.
Energy stocks were heading for their best day in six months after the OPEC+’s surprise decision to slash oil production.
The S&P 500’s Energy Index popped as much as 5.5% on Monday, its biggest move higher since October. The gauge pared some gains, but was still ahead 4.8% at $665.6 as markets moved toward the closing bell.
The top 10 gainers in the benchmark S&P 500 were all energy stocks, with Marathon Oil Corp ahead 10.4% and other major winners including Hess Corp and Exxon Mobil Corporation, which jumped 8.1% and 5.5%, respectively. Occidental Petroleum was up 4.64%.
“Higher energy prices should provide some earnings relief for the S&P 500 but adds ‘stagflationry policy risk’,” Jefferies analysts led by equity strategist Sean Darby wrote in a research note Monday. “We upgrade the sector to Modestly Bullish.”
The surge on Monday follows news Sunday that OPEC+ members will slash oil output by more than 1.1 million barrels per day, crimping global supply. Oil prices jumped on the announcement, with Brent and WTI crude up each about 6% to $80.31 and $84.76 respectively.
OPEC said the move was meant to ensure stability in oil markets and was a precautionary measure against the threat of a recession after global banking worries last month stoked fears of a downturn.
The Jefferies analysts wrote:
“We are long-term energy bulls. But the combination of oil prices moving away from a backwardation and the weakness in spot suggests that some of the relative performance might be lost. The sector has been the lone supporter for upward earnings revisions. We remain Modestly Bearish.”
