A Foolish Take: Energy Stocks Have Plenty of Room to Run

Expect more from oil and gas companies in the future.

Dan Caplinger
Dan Caplinger
Jan 30, 2017 at 4:09PM
Energy, Materials, and Utilities

The energy sector has rebounded over the past year in lockstep with improving crude oil prices. It looks like there's more room to climb.

Price of crude oil compared to share price of E&P company ETF.

Image source: Ycharts.

The SPDR S&P Oil & Gas Exploration and Production ETF (NYSEMKT:XOP) tracks shares of companies that actively look for and produce oil and natural gas, and it demonstrates the sector's correlation with oil prices.

There's no guarantee that oil prices will rebound any time soon. When oil topped out at $40 per barrel in the late 1970s and then started moving lower, it took 25 years for prices to regain that level for good.

Yet long-term investors know that the energy markets are cyclical, and they tend to reward those who are patient. Energy companies could see a lot more upside in the long run.