Investors have shifted their focus to the Energy sector due to expectations of companies fulfilling their commitments to increase stock buybacks and raise dividends. “Currently, the overarching narrative in the oil and gas arena revolves around capital discipline and the prioritization of returning cash to shareholders,” remarked Rob Thummel, senior portfolio manager and managing director at Tortoise.
This newfound “discipline” is occurring against the backdrop of companies already reaching near-record production levels. Devon Energy shares experienced a boost on Tuesday following the oil and gas explorer’s impressive fourth-quarter profits. This success was further underscored by an all-time high production output and an announcement of a 9% quarterly dividend increase for 2025.
Thummel emphasized the efficiency gains seen in the industry, stating, “Oil and gas producers are enhancing their production capabilities while concurrently driving down operational costs. This reduction in costs across the board ultimately lowers the breakeven point for oil and gas producers.”
In a separate development, natural gas futures (NG=F) recently surged to two-year highs, partially attributed to unanticipated colder weather conditions. The rise in liquefied natural gas (LNG) exports and the escalating demand for electricity also contributed to the upward trajectory of prices.
Despite the positive momentum, there are potential factors that could temper these gains, as noted by Rob Haworth, senior investment strategist at U.S. Bank Asset Management. “Two key considerations are the seasonal shift towards spring, which typically reduces domestic heating fuel demand, and the potential resolution of the Russia/Ukraine conflict, which might reintroduce Russian energy supplies to the global market,” Haworth informed Yahoo Finance.
On the oil front, prices have remained relatively stagnant for the year following an initial surge at the beginning of 2025, prompting caution among analysts. Stewart Glickman, deputy research director at CFRA Research, expressed skepticism about the ongoing rally, particularly in light of the recent indication from the Organization of Petroleum Exporting Countries and its allies (OPEC+) hinting at a potential delay in increasing production levels for the fourth time. This hesitation signals concerns about oversupply in the market.
Glickman cautioned, “Given the absence of a genuine energy shortage, investors should exercise moderation in their enthusiasm regarding the prospects of energy firms in 2025.”
Ines Ferre, a senior business reporter for Yahoo Finance, provides comprehensive coverage of the latest stock market developments. For more detailed insights into the current financial landscape and events impacting stock prices, click here. Stay updated on the most recent financial and business news from Yahoo Finance.
