But unlike years past, Morgans does not view the current...

But unlike years past, Morgans does not view the current underperformance of oil stocks as structural. The broker expects equities to re-rate during the second half as numerous short-term factors reverse.

As a base case, Morgans sees oil prices well supported by the rapidly changing supply dynamics, which the broker thinks are also dampening the current required supply response.

The broker suspects this is creating short-term potential for exceptional oil price upside, which means stocks are unlikely to remain at sharp discounts for very long. With this view in mind, Morgans maintains an Overweight recommendation on energy, assuming covid does not further impact demand in the near term.