The global economic recovery from COVID-19-driven damages is supporting a steady recovery of the energy industry. While some energy stocks are expected to continue riding a wave created by rising oil prices, the initiatives of governments worldwide to transition to an emissions-free future make the prospects bleak for many energy companies. China Petroleum (NYSE:SNP) & Chemical Corporation (SNP) and Exxon Mobil (XOM) are uniquely positioned to deliver substantial returns in the coming months. However, we think ConocoPhillips (NYSE:COP) and EOG Resources (NYSE:EOG) may not be able to capitalize on the industry’s recovery and could witness a share-price pullback. Let’s pore over these companies.The continued easing of pandemic-induced restrictions has been leading a reopening of industrial activities and, thus, driving rising energy consumption this year. According to the EIA, the global consumption of petroleum and liquid fuels will average 97.7 million b/d for all 2021, which is a 5.4 million b/d increase from 2020. Furthermore, the global oil and gas EPC market is expected to chart a 5% CAGR from 2019 to 2027.
Investors’ increased optimism about the industry’s growth prospects is evident in the Vanguard Energy ETF’s (VDE) 56% returns over the past year, compared to SPDR S&P 500 ETF Trust’s (SPY) 45.5% gains over this period.
However, increased federal scrutiny of energy companies’ efforts to transition to solar and wind, coupled with the further tightening of policies and rising carbon taxes, could mar the industry’s growth. While energy companies China Petroleum & Chemical Corporation (SNP) and Exxon Mobil Corporation (NYSE:XOM) are well positioned to weather these challenges and capitalize on secular tailwinds, we think ConocoPhillips (COP) and EOG Resources, Inc. (EOG) could struggle to stay afloat in the near-term owing to their weak financials.