The energy sector has been a rare bright spot this year – one of only two sectors on the MSCI World Index that are in positive territory. The sector has gained about 15% this year, which is better than the broader index, which has lost about 20% over the same period. Oil prices have risen in recent months, following a fall at the height of the COVID-19 pandemic, as refining capacity failed to keep pace with the resurgent economy. Russia’s invasion of Ukraine pushed oil prices even higher, with sanctions affecting Russia’s ability to export its crude and refined products to Europe and beyond. In the US, President Joe Biden ordered an unprecedented release of 180 million barrels of oil from the US Strategic Petroleum Reserve and called on other countries to do the same in an effort to drive down prices. Biden urged US oil refiners to ramp up production, saying they needed to help ease the burden of higher prices on consumers, while calling refinery profit margins “above normal” “unacceptable”. Oil-producing group OPEC and its allies have committed to raising total monthly output to 648,000 barrels per day for July and August, but concerns over excess capacity from OPEC+ members mean oil markets are likely to remain tight as Demand continues to exceed supply. Hedge fund manager David Neuhauser said the energy sector is his favorite because he doesn’t expect oil prices to come down anytime soon. “I think Brent oil could go up to $175 a barrel … about 50% more,” said Neuhauser, Livermore Partners’ founder and chief investment officer, in an interview with CNBC. “They are hard assets, they are true and they are tangible,” he said. “They’re used in the global economy every single day. They’re rare. Everything is cyclical, for sure, but unlike previous cycles, this cycle looks like it’s going to be a lot longer than the others.” Global benchmark Brent crude futures were trading higher on Friday at over $111 a barrel, while West Texas Intermediate crude futures, the US benchmark, was trading at around $108. A fan of small-cap energy firms, Neuhauser’s fund has stakes in oil and gas exploration and production firms Vista Energy and Zedstone as well as Canada’s Colibri Global Energy. He often takes a proactive approach with his investments. He said, “There are still a lot of small and medium names where the executives think they have a game plan and eventually it’s all going to work out. But I think sometimes you have to push them to make deals.” Does matter.” One example is Jadestone, a company that Neuhauser invested in six years ago, when it was valued at $30 million. Today, it is many times that amount and is generating more than $100 million per year in free cash flow, he said. Bank of America strategist Savita Subramaniam also expects oil prices to last longer. The bank’s base case for Brent and WTI is $104 a barrel and $100 a barrel in 2022, respectively. “Our commodity strategists expect that a sharp contraction in Russian oil exports could trigger a full-blown 1980s-style oil crisis… China’s once red-hot economy has suffered a slowdown amid continued Covid-19 lockdowns, but a rebound may be on the horizon, according to data from the National Bureau of Statistics China’s official Manufacturing Purchasing Managers’ Index came in at 50.2 in June, crossing the 50-point mark for the first time since February. A figure above 50 indicates growth in the sector. was a day consumer [prior to the lockdowns]Dan Pickering, founder and chief investment officer of Pickering Energy Partners, told CNBC: “The hard numbers say China with its rolling Covid issues shut down about 1 million barrels a day, but some of that came back.” last month. We expect the reopening of activity to push that demand number toward 14 million barrels a day.” One can look at the barrel and say it’s cheap,” he said. One wild card is economic. Months of high energy prices have pushed up prices for all kinds of goods and there are signs the US economy is slowing. If that happens, oil prices could drop if demand slows. When it comes to stock picking, energy companies “still look cheap,” Pickering said, adding that many are “very attractive.” Forwards are trading in multiples. He prefers oilfield services provider Schlumberger, which he said is trading at a price of about 30% below May’s highs and about 13 times 2023 earnings. He also supports a number of oil exploration firms, all of which are now trading around 30% from their recent highs, according to Pickering. These stocks also enjoy a low EV/EBITDA ratio and high free cash flow yield, he added. The EBITDA ratio — or enterprise value-to-earnings GS before interest, taxes, depreciation, and amortization — compares a company’s value, which includes debt, to its cash income including non-cash expenses. These stocks are Devon Energy, Diamondback Energy and Antero Resources, which are trading at less than four times their 2023 EV/EBITDA multiples. Goldman Sachs has identified a number of buy-rated energy stocks with environmental, social and governance characteristics as a core part of its investment highlights. These include Norwegian aluminum and renewable firm Norsk Hydro, Norwegian hydrogen producer and distributor Nel and Spanish oil and gas firm Repsol. Shares of Repsol are up about 40% this year. The stock closed Thursday at 13.9 euros ($14.50), meaning a possible increase of 36.7% to Goldman’s price target of 19 euros. Norsk Hydro and Nell are down about 14% and 21%, respectively, but remain buy-rated by Goldman. The firm has a price target of 112 Norwegian Krone ($11.30) for Norsk Hydro and 21 Norwegian Krone for Nel.