The S&P 500 Energy Sector, which had recently been experiencing a remarkable winning streak, finally saw a decline on Thursday. Although the sector closed just 0.2% lower, it marked the end of an eight-day winning streak, the longest since March 2022. If Thursday had ended with a higher close, it would have been the sector’s best stretch in over a decade, as the last time it achieved a nine-day winning streak was back in October 2009.
The recent gains in the energy sector have primarily been driven by rising oil prices. WTI crude prices have risen by 3.9% so far this month. However, on Thursday, both energy stocks and crude experienced a decline. The Front Month Nymex Crude for October delivery lost 67 cents per barrel, or 0.77%, settling at $86.87. This marked the end of an even longer winning streak for crude, with nine consecutive days of gains, the longest since January 2019.
Despite the setback, energy investors should not be too disheartened. The S&P 500 Energy Sector has still managed to climb 2.5% in September, a significant increase considering that the sector has only risen 3.3% year to date overall.
Moreover, there is potential for further gains in the future, as the energy sector has severely lagged behind the overall rise of the S&P 500 this year (16% year to date). Market watchers predict that oil prices may experience a steeper rise in the remaining months of 2023. UBS expects crude prices to increase by approximately another 6% this year, with a forecasted $91 per barrel for the U.S. WTI benchmark by the end of December.
Given that many energy stocks tend to move in sync with oil, investors should not interpret Thursday’s decline as a sell signal just yet.