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Quarter-End Insights

Our Outlook for Energy Stocks

Following our updated oil and gas mid-cycle prices, we have several 4- and 5-star stocks to recommend this quarter.

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  • Oil prices remain elevated despite signs of a weakening global economy. We think the uncertainties around future oil supply growth are likely to continue to place upward pressure on prices.
  • Fundamentals for gas-focused E&Ps are likely to remain pressured through 2011, but we expect the large-scale shift toward liquids production, a lessening of held-by-production drilling, and fewer dry gas drilling carries to result in higher gas prices in 2012.
  • We recently raised our mid-cycle oil price assumption to $95 per barrel and lowered our gas price assumption to $6.50 per thousand cubic feet. 

The past quarter has seen some of the air come out of oil prices, though more from fears of a weakening global economy than from any real abatement of Middle Eastern unrest. Mixed economic news from the U.S. and ongoing concerns about potential eurozone defaults, plus a slight deceleration in China's growth in recent months cast a shadow on global growth prospects.

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Jason Stevens has a position in the following securities mentioned above: RRC. Find out about Morningstar’s editorial policies.