Energy Stocks Lag Oil, But Not For Long

The oil market is starting to come out of its apathy. Thanks to the geopolitical conflicts between Iran and Israel, financial fund flows are no longer overwhelmingly bearish. On the same token, physical oil market conditions have meaningfully improved and Q4 global oil market balances are surprising to the bull side. In particular, product storage draws have been healthy, resulting in higher refining margins in the future. This should propel crude prices higher and keep them between $75 to $80/bbl WTI.

3-2-1 Crack Spread

Note: Please divide by 3 to arrive at 3-2-1 crack spread.

But taking a step back and looking at the broader energy sector, I think we are on the cusp of a major move higher in energy stocks.