S&P energy sector’s record 2022 performance ‘built on downfall of others’

The energy sector was not only the S&P 500’s top performer of 2022 with a 58% spike year-to-date; it was also the benchmark’s only segment not saddled with a loss over the same time.

Dow Jones Market Data shows the S&P 500 energy index is on pace for its best year on record, exceeding the last high mark of 47.74%. The record gain also marks the first time there was only one S&P sector higher on the year.

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In an interview with FOX Business, Craig Erlam, a senior market analyst for OANDA in New York, said alongside the Russian invasion of Ukraine, "Inflation and the cost-of-living was partly fueled by soaring energy prices as the economy recovers from the pandemic much faster than oil producers anticipated."

As a result, "Oil and gas companies have understandably been the standout performer of 2022, but their success was built on the downfall of other sectors," he continued. "The performance of energy firms in the S&P is intrinsically tied to the price of oil and gas, and while they’ve enjoyed a record year, most others have had a very different experience."

Overall, the S&P 500 is roughly 20% lower year-over-year and headed for the worst finish since 2008, while benchmark sectors like Industrials, Health Care, Financials, and Materials are all well beneath the redline during the same period. 

Ticker	Security	Last	Change	Change %
SP500	S&P 500	5048.42	-23.21	-0.46%

What about 2023?

While producers have finally caught up with post-pandemic demand, Erlam said "Many challenges still lie ahead which could keep oil and gas prices elevated—the war in Ukraine being the obvious one but also China’s recovery following the decision to abandon zero-Covid."

As of Thursday, Nymex crude was up 61.58% over the last two years. Front Month ICE Brent crude is up 58.8% over the same period.

"The high price environment of 2022 helped oil stocks to outperform the rest of the market. This may be a hard act to follow in 2023," said Derren Nathan, Head of Equity Research, Hargreaves Lansdown.

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Year-over-year, noted oil producers in the S&P like Chevron, Devon Energy, and Marathon Oil have jumped at least 39% in positive territory, as Warren Buffett’s Occidental Petroleum exploded over the same time with a 115.44% spike into the green.

Ticker	Security	Last	Change	Change %
CVX	CHEVRON CORP.	165.32	+1.63	+1.00%
DVN	DEVON ENERGY CORP.	52.62	+0.53	+1.02%
MRO	MARATHON OIL CORP.	27.74	+0.21	+0.76%
OXY	OCCIDENTAL PETROLEUM CORP.	67.86	+0.53	+0.79%

"While risks remain tilted to the upside for prices, the question is how much of that is already priced in when assessing their potential performance against other sectors," Erlam said. 

"With so much uncertainty, it’s very difficult to say what the S&P 500’s energy sector will do in 2023, but they look in a comparatively good position going into what will be another difficult year for the global economy," he finished. 

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