Just past $7 should be a break out year ahead. This snippet...

Just past $7 should be a break out year ahead. This snippet below is out of the fin review.

What’s your outlook for the energy sector this year, can Brent reach $US100 a barrel?

Sitting at the start of 2022, we are looking ahead at multiple years of positive economic growth for the world, and with this comes strong underlying demand for oil.

We expect oil prices to continue to strengthen towards in excess of $US100 per barrel in the near term, and we would not be surprised if the commodity traded through $US200 in the next couple of years.

If the global energy crisis over the last six months has confirmed anything, with spot LNG trading well in excess of $US200 per barrel of oil equivalent, these “structurally challenged” fossil fuels continue to be integral to the energy mix in the near term. Almost a decade of underinvestment is placing them in a position to react in extremely violent fashion through the ongoing energy transition.

Unfortunately, for Australian investors, the ASX large-cap energy sector has performed with some ambivalence to the prevailing strength in the commodity. This is very much at odds with the US oil and gas (E&P) sector, with the US E&P sector up over 80 per cent in 2021.

The combination of underweight positioning towards the Australian energy sector, our expectations regarding the outlook for both strengthening earnings, and unchallenged valuations supports our view that we could see an explosive performance from energy equities in 2022.