How a rebound in oil prices is impacting ASX energy stocks

The ASX-listed energy stocks are responding well to the sudden increase in energy demand across the globe, especially in the United States. The Australian energy sub-index gained ~ 50 per cent last month with the index climbing to a 4-month high of 9,244.50 from 6,161.00 in October 2020.

The index also climbed ~ 8.51 per cent from 7,876.60 (intraday low on 2 February 2021) to the present high of 8,431.00 (as on 16 February 2021, 2:26 PM AEDT), thanks to recovering crude oil prices in the wake of strong demand from many states across the United States.

Brent crude oil prices have reached a fresh 52-week high with Brent crude oil futures, climbing to USD 63.76 per barrel (as on 15 February 2021, 2:26 PM AEDT). While the shifting global curve towards decent demand and somewhat limited production have augured well for crude oil prices, the current power outages across many US states are further propelling the commodity.

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Extreme weather conditions across the Northern Hemisphere have crippled the power system of many states from North Dakota to Oklahoma, leading to frequent blackouts, especially in Texas. The power system of Texas has taken a hit from limited natural gas supply and frozen windmills, which serve as the top-most source for power generation in the state, leading to a spike in crude oil demand.

To Know More, Do Read: Texans Struggle Amid Deadly Winters and Power Outages

Furthermore, the same extreme cold conditions have dented the crude oil supply chain in one of the top-most oil producing regions across the United States. As per some industry experts, as much as 10 billion cubic feet of gas production and over a unit million barrel of oil production have been shut due to the extreme freeze in Texas alone.

In the wake of a strong recovery in crude oil prices and demand, many ASX-listed energy stocks have gained considerable momentum over the past couple of months. The Australian energy sub-index or ASX 200 Energy delivered 11.55 per cent of total return over the past three months.

To Know More, Do Read: ASX Energy Stocks Rejoice as Black Gold Regains Strength

Three-Month Total Return Chart (Data Source: Refinitiv Eikon Thomson Reuters)

Though many ASX-listed energy stocks have gained from a surge in crude oil prices, many others are yet to match pace with the underlying commodity. Meanwhile, industry experts anticipate that such underperforming stocks are yet to realise the gain in crude oil prices.

For instance, as per Morgan Stanley (reported by Reuters), the local energy stocks could draw more investor interest as they have so far lagged in realising the benefits amid a strong upturn in oil prices.

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