Monday was a great day for stocks overall, but one sector absolutely dominated the day: energy. In fact, the Energy Select Sector SPDR Fund (ARCA: XLE (NYSE:XLE)) was up more than 6% on the day, nearly double the returns of any other sector.
Why Are Oil And Gas Stocks Soaring? OPEC+, the coalition of countries largely responsible for the world’s oil supply, is expected to announce a historic cut in production in order to prop up crude oil prices. WTI crude oil was up more than 4% on the day, trading back above $80 a barrel.
Across the board, energy stocks were strong on Monday: Chevron Corporation (NYSE: NYSE:CVX) traded up more than 5%, Warren Buffett's favorite Occidental Petroleum Corporation (NYSE: NYSE:OXY) also traded higher by around 5%, Diamondback Energy Inc (NASDAQ: FANG) was up nearly 8% and Marathon Oil Corporation (NYSE: NYSE:MRO) was up 10.63%. You get the picture. Look at an oil and gas stock on Monday and chances were it was up by a significant amount.
Related Link: Why Marathon Oil Shares Are Surging Higher
Recession fears have been weighing on the oil market, with the United States Oil ETF (ARCA: NYSE:USO) down more than 25% from its June peaks. The OPEP+ production cuts are intended to stabilize the price of oil by decreasing the supply to match a drop in demand.
Outside of the OPEC+ cut headlines, oil companies could also be trading higher as some investors speculate that the Federal Reserve may begin easing its hawkish policy stance quicker than anticipated. The Fed held a closed-door meeting on Monday to discuss its plans to raise interest rates. Some market participants clearly saw this as a sign the Fed is willing to reverse course to avoid financial instability.
The 5-year yield was down significantly Monday, as was the dollar, in a sign that the bond market is betting that the Fed will eventually ease its hawkish stance.
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