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Energy Stocks Continue To Outperform The Market

1. Energy Stocks Outperform Stocks Market, Again

- For the second year in a row, energy stocks have outperformed the broader US market in 2022 and, according to most analysts, this trend will continue next year thanks to their relative cheapness.

- With oil and gas stocks showing the highest free cash flow yield of any sector represented in the S&P 500, it should come as no surprise that Wall Street sees a further 16% of potential upside in 2023.

- A total of 61% of energy index companies have a buy rating, compared with 55% for the entire S&P 500, despite recession headwinds taming investors’ appetite.

- While oil prices are trading at a similar level to where they began the year, the S&P 500 energy index remains stubbornly some 50% higher year-on-year.

2. The Return of Chinese LNG Demand

- Similarly to China’s crude woes, the Asian powerhouse’s gas demand is set for its first annual decrease in the country’s history as it falls to 364 Bcm, down 1% from last year.

- The easing of China’s strict zero-Covid regulations, however, should bring it back to a growth trajectory as S&P Platts expects a 6% year-on-year surge in demand to 386 Bcm in 2023.

- The Chinese energy major CNOOC issued its first LNG buy tender since the start of the Russia-Ukraine war, a sea change to 2022 when China’s LNG buying fell a precipitous 25% compared to 2021.

- Seeing more pipeline…

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