Energy stocks surge as investors shift from tech to value

Market & Trading Calls

• Crude: Bullish — Sanctions on Iran and a Chinese teapot refiner disrupt MEG flows; backwardation in Dubai likely to steepen.
• Refined Products: Bullish RBOB — Seasonal demand rebound and spec shift supportive into April.
• Natural Gas: Bearish Henry Hub — Injection season starts early; storage builds pressure prices.
• Metals: Bearish copper — US import premium near unsustainable highs, watch for retracement.
• Agriculture: Bullish wheat — US Plains weather risk supports price; watch Kansas yield potential.
• Story of the Week: Energy stocks surge as investors shift from Tech to Value

Story of the Week: Energy stocks surge as investors shift from tech to value

As of March 24, 2025, the MSCI Energy Index has exhibited notable performance compared to broader market indices, rising nearly 9% year to date, while the S&P 500 has declined by 3%. This strong performance persists despite a 3% decrease in oil prices year to date, marking a reversal after two consecutive years of underperformance.

Several factors have contributed to this uptick. Higher-than-anticipated global inflation, economic uncertainties (with the energy sector offering substantial dividends), and below-average valuations have bolstered the sector. After years of increasing dividends and share buybacks, the sector is now viewed as a viable hedge during uncertain times. Additionally, rising U.S. natural gas prices have further supported this growth. In 2025, the Henry Hub spot price is projected to average $4.20 per MMBtu, reflecting an 11% increase. This uptick is primarily due to colder-than-expected weather during January and February, which led to increased natural gas consumption for space heating. Consequently, natural gas withdrawals from storage were larger than average, resulting in inventory levels falling below 1.7 trillion cubic feet at the end of March—10% below the previous five-year average.

Despite this recent surge, the sector's underperformance in previous years remains significant. As an example, Berkshire Hathaway's investment in Occidental Petroleum has faced challenges. Berkshire began acquiring shares in Occidental in 2019, initially purchasing $10 billion worth of preferred stock to finance Occidental's acquisition of Anadarko Petroleum. This investment included warrants to buy an additional 83.9 million shares at $59.62 each. Over time, Berkshire increased its stake, and as of March 2025, it owns approximately 28.8% of Occidental's common stock, totaling around 255.3 million shares. However, this investment has yet to yield substantial profits. Berkshire's average purchase price is estimated at $53 per share, resulting in a paper loss of approximately $1.5 billion, given Occidental's current trading price near $48. The oil and gas sector has gone from worst to first, but that hasn’t been true for long enough. Higher energy prices may probably be needed to add additional flow into the sector, or a further tech sell-off to reallocate capital.

Beyond the oil & gas sector, mining companies have also outperformed the broader market. Gold companies, in particular, have led the way, with Lundin Gold up 42% year to date, Alamos Gold up 41%, and Kinross Gold up 32%. In the oil & gas sector, Hess Corporation has been a top performer, rising 18%. Natural gas-focused companies like Cheniere Energy, Antero Resources, and Texas Pacific Land Corporation have also shown strong performances, up 16%, 15%, and 15%, respectively. Major players like Chevron have gained 15%, contrasting with declines in technology stocks such as Nvidia and Meta Platforms, which have decreased by approximately 12.5% and 8%, respectively.

Relative index performance indexed to January 1, 2025

Source: Kpler calculations based on MarketView and MSCI

CFTC and ICE speculative positioning as of March 18

Source: Kpler calculations based on CFTC and ICE

Crude Oil: The rebound in WTI (-19k net, +25k shorts) came to a halt as speculators raised their bearish bets on the US benchmark amid refinery maintenance in the US approaching its peak (see section Weekly Performance across Commodities). Positioning in Brent (+53k, +40k longs), on the other hand, saw significant support from heightened geopolitical uncertainty (limited progress in Russia-US talks, rising US sanction pressure on Iran), while M1/M3 market structure at a seven-week high also reflects a slight tightening in the physical North Sea market.

Refined Products: European Gasoil (-19k, +15k shorts) recorded the fifth consecutive weekly drop as the heating season has ended. Net length remains very weak (net length in the 3rd percentile), however, the long/short z-score of -0.54 shows that relative positioning among speculators is not too heavily skewed yet. Net length in RBOB Gasoline (+23k, -18k shorts) has rebounded amid pronounced short covering as Atlantic Basin refinery maintenance is curbing products output. From current weak levels (9th percentile, z-score -0.93), Kpler expects significant upside to positioning and cracks in Q2 (see Weekly Performance across Commodities).

Speculative futures positioning – RBOB Gasoline (lots)

Source: Kpler calculations based on CFTC

Natural Gas:  Henry Hub positioning (-27k, -31k longs) came under pressure from a second week of strong long liquidation as warmer weather has already led to net storage injections in the US in mid-March. While the net long percentile of 85% still reflects bullish positioning among investors, the long/short z-score has decreased strongly w/w from +1.8 to +1.3 last week, indicative of a less crowded bullish positioning.

Metals: Positioning in gold strengthened further from elevated levels, with five-year net length now in the 91st percentile. Nevertheless, the near-term downside appears relatively limited given that the long/short z-score of +0.05 indicates a very balanced distribution of bullish and bearish bets among money managers. Positioning in silver (+7k, +8k longs) surpassed the highs from October 2024 and reached a five-year high. At the same time, the long/short z-score rose from 2.35 last week to an even more extreme 2.78, suggesting an upcoming trend reversal. Net length in copper (+9k, +5k longs) continues to improve but remains at a relatively modest 58% five-year percentile, while the long/short z-score is trending in negative territory (i.e. relative positioning remains below the five-year average). This stands out insofar as simultaneously, Comex prices have risen within reach of the May 2024 record. This indicates that money managers do not expect significant additional upside potential, especially as the premium versus LME copper has widened to a record $1,300/mt.

Speculative futures positioning – Silver (lots)

Source: Kpler calculations based on CFTC

Agriculture: After having risen massively throughout H2 2024, net length in corn (-39k, +21k shorts) remains on a downward trajectory, having shed 68% since late February. The improved outlook on Brazil’s corn harvest, despite recent dryness, continues to weigh on US export prospects. So far, Mexico, the largest buyer of US corn, has refrained from implementing retaliatory tariffs; however, a bearish long/short z-score of -0.48 could be an indicator for speculators’ expectations of upcoming export weakness. Positioning in soybeans (-6k, -5k longs) inched lower again and remains at subdued levels, with net length in negative territory, a five-year percentile of 20%, and a long/short z-score skewed towards shorts (-0.63). China, the largest buyer of US soybeans, already implemented a 10% tariff. An additional hike in tariffs appears possible should the US-China trade war escalate further, especially when considering that China has strategically diversified its soybean sourcing away from the US towards Brazil in recent years, while simultaneously Brazil is expecting a record harvest this year.

Weekly performance across commodities and indices to March 21 (Friday-Friday)

Source: Kpler calculations based on MarketView

Crude: Brent (+2.2% w/w) and WTI (+1.6%) recorded their second consecutive weekly gain amid an expanded OPEC+ compensation cut plan starting in March (see here) and a fourth round of US sanctions on Iran this year. Not only were eight additional vessels involved in the Iranian oil trade sanctioned but also, for the first time, a Chinese teapot refinery was also targeted (the privately-owned 60 kbd Shandong Shouguang Luqing Petrochemical refinery in Weifang). As a result. Shandong buyers are likely to become more risk-averse, which could drive up backwardation in Dubai again as refiners will rush to source similar-quality crude in the MEG (see here).

Refined Products: RBOB gasoline (+2.2%) firmed slightly on a draw in US gasoline inventories. IIR data shows that US offline refining capacity has nearly doubled compared to the start of the month, while demand should seasonally begin to improve, strengthening the outlook on RBOB cracks in April. Additional support will stem from the impending shift to summer specs (see here). European gasoil (+3.6%) strengthened versus Brent amid a tightening market in the Med. Russian refinery maintenance currently reduces gasoil availability out of the Black Sea and could divert cargoes previously bound for Northwest Europe. The open transatlantic arb has started to narrow amid recovering TC14 freight rates.

Natural Gas: Henry Hub (-3.0%) continues to come off the two-year highs from early March. Warmer weather currently offsets pipeline maintenance (Equitrans, Acadia) and force majeure events (El Paso). In addition, following strong stock withdrawals throughout most of Q1, injection season has started (+9 Bcf in the week ending March 14; EIA). TTF (+0.2%) moved sideways as lower temperatures are balanced by a recovery in wind generation, strong LNG imports, and rising pipeline supply, which contributed to flat EU carbon prices (+0.6%). JKM (-1.9%) weakened on mild weather in Northeast Asia and ample Pacific supply, which balanced growing demand from India hit by early heat waves.

Metals: Gold (+0.8%) rose further, remaining above the $3,000/oz threshold last week. Support is coming from heightened geopolitical uncertainty (US-Russia talks have eased tensions less than what was hoped for), economic risks (US tariff turmoil), a weaker US 10-year yield, and a w/w strengthening in the US dollar (US Dollar Index +0.4%). The gold-to-silver ratio has remained in the high 80s over the past year—an elevated level, though not unprecedented by historical standards. Currently at 90.7, the ratio suggests that silver is somewhat undervalued relative to gold.

The rally in copper (+4.5%) continued, with the US benchmark now within reach of the record-high from May 2024. The anticipation of potential US tariffs on copper imports, coupled with a highly elevated US import dependence (45% in 2024) supports US copper prices in particular. However, by now, the Comex premium over LME reached 13.5%, an unsustainable level even in light of potential tariffs. Aluminum (-2.7%) weakened as the supply situation regarding bauxite and alumina continued to ease. SHF alumina prices fell to the lowest level since December 2023 amid the launch of new capacity in Asia. However, as more producers become unprofitable and start maintenance, Kpler expects alumina prices to find support in the 2,900-3,000 yuan/t range. Iron ore (-4.6%) came under renewed pressure from a rebound in Australian shipments as miners accelerated exports ahead of the end of the quarter, offsetting firm crude steel output from CISA member mills in the first ten days of March (+3.6% y/y) which drew Chinese port inventories to a one-year low of 144 Mt (see here).

Agriculture: Wheat (+2.3%) extended last week’s gains after dryness and high wind in the US Plains sparked concerns of damage to the crop. In fact, in Kansas, the largest wheat-producing state in the US, winter wheat crops rated in good-to-excellent conditions dropped 4 percentage points w/w to 48% (still above the five-year average). Similarly, corn (+0.7%) rose on recent dryness in Brazil impacting the safrinha corn crop. However, the crop is currently at a less sensitive development stage than during the upcoming pollination phases (see here).