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The first quarter of 2024 saw the S&P 500 gaining 10.2%, its strongest performance in five years. This was attributed to positive sentiment surrounding AI stocks and speculation about potential interest rate cuts by the U.S. Federal Reserve. All three major U.S. indices also recorded significant gains during this period.

Despite the overall success, the real estate sector was the only one to decline in the first quarter. However, four sectors managed to achieve double-digit gains, with the energy sector leading the way with a 13.5% return. Rising oil prices were cited as the main driver behind the sector’s resurgence in Q1.

FactSet data revealed that the Big Three refiners – Marathon Petroleum, Valero, and Phillips 66 – outperformed the broader energy sector, with an average of 30.8% returns. Marathon led the pack with a total return of +36.5%, followed by Valero (+32.3%) and Phillips 66 (+23.6%). The upstream companies, which include oil and gas producers, also saw positive returns, with Ring Energy and Diamondback Energy leading the group.

Despite a strong performance in Q4 2023, the midstream segment of the energy sector underperformed in Q1. Summit Midstream Partners LP led this segment with a gain of 56.7%, followed by Targa Resources Corp. with a 29.7% return. Integrated supermajors, such as ExxonMobil and BP, also saw gains during the quarter, with ExxonMobil gaining 17.3% and BP gaining 7.7%.

Overall, energy prices are on the rise, with OPEC+ supply reductions impacting the oil markets. Record U.S. oil production has helped to mitigate some of the effects, but it is unlikely that oil prices will significantly drop. As a result, the energy sector is expected to continue performing well throughout the year.

In conclusion, the first quarter of 2024 was a strong period for the S&P 500 and the energy sector in particular. Positive sentiment surrounding AI stocks, potential interest rate cuts by the Federal Reserve, and rising oil prices were key factors driving the market performance. With energy prices expected to remain elevated, the sector is likely to continue to perform well in the coming months.

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