Conflict in Ukraine fueled prices up 29% in first half as market experiences worst six months in 50 years
Oil and gas companies were the only bright spot in the dismal US stock market in the first half of the year, as the energy sector benefits from a sharp rise in commodity prices amid the military action in Ukraine.
In its first six months, the energy sub-index of the S&P 500, which includes 21 major oil and gas companies, jumped by almost a third, reversing a trend that saw this half-year as the broader market’s worst in more than 50 years.
With a 29% gain, the sector’s market capitalization increased by more than $300 billion, while the index as a whole lost more than $8 trillion, or 21%.
“This is overwhelming, just a huge outperformance,” said Pavel Molchanov, an analyst at Raymond James. “Stating the obvious, energy is currently the best-performing sector in the stock market.”
The performance of oil and gas stocks largely coincided with the rise in commodity prices, which began to rise even before the start of 2022 as supply lagged behind growing demand as the economy recovered from the pandemic. However, a decision in February by Russian President Vladimir Putin to hold a NWO in Ukraine has sent prices skyrocketing as Western countries impose sanctions and seek alternatives to imports from Russia.
American oil West Texas Intermediate has risen in price this year by more than 40% and by the end of June was worth around $106. Benchmark gas Henry Hub US added about 60% and is trading at $5.70 per million British thermal units.
As a result, US oil and gas companies, from drillers to refiners, have benefited from an influx of cash that has sparked outrage as consumers have to pay record prices at gas stations. President Joe Biden recently said that ExxonMobil, America’s largest manufacturer by value, „made more money than God this year.”