How Energy Stocks Performed In 2024

Market Performance Overview - The S&P 500 achieved a total return of 23.3% in 2024, building on its 24.2% gain in 2023, driven by optimism around AI and Federal Reserve interest rate cuts [1] - Seven out of eleven sectors underperformed the broader benchmark, while five sectors delivered returns of at least 20% [1] Artificial Intelligence Sector - AI stocks led the market surge, with Nvidia gaining 171% and Broadcom rising 108% in 2024 [2] - Consumer discretionary stocks outperformed in Q4 2024 with double-digit returns, while health care and materials sectors faced double-digit losses [2] Energy Sector Performance - The energy sector delivered a modest total return of 5.6% in 2024, with significant variance across subsectors [3] - Midstream companies led the energy sector with an average total return of 20.8%, with Targa Resources Corp. delivering a 110.1% return [4] - Upstream companies recorded an average gain of only 1.5%, with PrimeEnergy Resources and Comstock Resources leading at 106.5% and 105.9% respectively [5] - The refining segment struggled, with the "Big Three" refiners (Marathon Petroleum, Valero, Phillips 66) posting an average decline of 6.2% [6] - Integrated supermajors ended the year down an average of 3.1%, with ExxonMobil gaining 11.3% and Chevron eking out a 1.3% gain [7] Outlook for 2025 - The energy sector faces a mixed outlook for 2025, with a favorable regulatory environment under the incoming Trump Administration expected to benefit oil and gas operators [8] - OPEC+ production cuts and record U.S. oil output are likely to keep oil prices subdued, resulting in modest profitability for the sector [9] - Midstream companies remain well-positioned due to stable cash flows and attractive yields, while upstream and refining companies will need to focus on cost efficiency and operational resilience [10] - The energy sector is expected to maintain moderate prices and selective subsector outperformance in 2025, offering measured opportunities for investors [11]