Even though crude oil and natural gas stocks did not participate into today’s market rally, their recent run is likely to continue as seasonal strength in both typically lasts until late into the second quarter and beyond. Based upon research in the Stock Trader’s Almanac 2021, Sector Seasonality, found on pages 92 to 96, seasonal strength in the NYSE Arca Natural Gas Index (XNG) runs from the end of February until the beginning of June while strength in the NYSE ARCA Oil & Gas Index (XOI) runs from mid-December through the beginning of July. In recent years, ample supply, and depressed demand had keep prices largely in check and seasonal bullish moves were muted or even overridden by weak fundamental data.
This time around strength in energy has been driven primarily by a rebounding economy as vaccine distribution continues. Cuts in supply are also leading to higher prices. As long as supply remains constrained and progress with covid-19 stays positive, oil and natural gas related stocks are likely to continue to rally.