No one can predict the future, and Wall Street analysts, despite that being part of their job, are no exception.
According to a December 2023 analysis by FactSet Research, analysts expected energy stocks in the S&P 500 to rise by more than 25% this year, about double the expected return of the next-best performing sector. Three of the 10 S&P 500 stocks that analysts were the most bullish on the cusp of the current year were in energy: oilfield services providers SLB (SLB) and Halliburton (HAL), and oil and gas producer APA Corp. (APA).
It didn’t pan out the way Wall Street expected. For the second year in a row, the sector trailed the broader market. Of the industries tracked by an S&P Global index, oilfield services and oil & gas exploration are the two worst performers in 2024, down 12% and 9%, respectively, through Friday's close. Each of the three stocks mentioned above have declined more than 28% this year.
Robust supply and sluggish demand have weighed on oil prices this year, creating a headwind for the companies that drill for crude. OPEC+, the Saudi-led petroleum cartel, has sustained production cuts first implemented in 2023. But those cuts have been offset by record production in the U.S. and an economic slowdown in China, the world’s second-largest oil consumer.
Next year’s not expected to be much better for oil producers. The U.S. Energy Information Administration (EIA) forecasts crude prices will be about 6% lower on average next year as domestic drillers ramp up production to a record 13.5 million barrels a day.
Nonetheless, Wall Street expects shares of the three oil companies mentioned above to post sizable gains in 2025. APA’s median 12-month price target is about 33% above its price as of Dec. 20. SLB’s stock is expected to rise 48%, and Halliburton’s is seen by analysts as rising 39%.
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