Energy stocks posted their first four-week winning streak of 2017, and some portfolio managers believe the sector can keep rallying.
The Energy Select Sector SPDR exchange-traded fund surged an additional 2.2 percent this week to post the best weekly gain of 2017.
Over the last month, the energy ETF has risen 3.7 percent, tracking just behind the 5 percent rally in U.S. West Texas Intermediate crude oil futures. Beyond gains in the underlying commodity, analysts pointed to some tailwinds for energy stocks.
Energy Select Sector SPDR ETF year to date
While U.S. crude is about 7 percent this year, the Energy Select Sector ETF has fallen about 12.6 percent. That marks a fairly large spread in performance, said Rob Thummel, portfolio manager at Tortoise Capital.
“It needs to play a little catch up yet,” he told CNBC. He noted that some of the week’s best performers were previously some of the year’s biggest laggards, including Chesapeake Energy and Range Resources.
Oil prices and energy stocks stand to get a boost as OPEC discusses extending its deal with other exporters to cut production, in Thummel’s view. The producers aim to shrink brimming global stockpiles of oil that have weighed on prices for three years.
At the same time, OPEC and the International Energy Agency both increased their forecasts for crude oil demand this week. On the supply side, more reliable monthly U.S. production figures show American drillers pumped less oil in June than preliminary weekly figures suggested, Thummel said.