The rising demand for oil and natural gas upon the resumption of economic activities and production cuts by the world’s major oil-producing countries have enabled the oil and gas industry to rebound quickly from pre-pandemic levels. The fast recovery of the global economy portrays a positive outlook for the industry, as the oil demand is expected to keep rising from reopening industrial activities. Given this backdrop, we believe Flowserve (FLS), Enable Midstream (NYSE:ENBL), and Star Group (SGU) are ideal investment bets for the second half of the year.After hitting record lows back in April 2020, oil prices made a stellar comeback to hit new highs lately, backed by production cuts by major oil-producing countries across the globe and rising demand from the reopening economic activities. OPEC plans to ease its production cuts by 2.1 million barrels per day between May and July, with a strong forecast that the demand would rise by 5.95 million barrels per day (BPD) this year, or 6.6%.
So, oil and gas companies engaged in midstream activities should witness solid growth with upward pressure on oil prices. The renewed investor optimism is evident from the Global X MLP & Energy Infrastructure ETF’s (MLPX) 36.9% returns year-to-date compared to SPDR S&P 500 Trust ETF’s (SPY) 12.9% gains. Although the second wave of COVID-19 in India, and the United States’ delicate relation with Iran is causing distress in the oil market, the broader prospects look promising for the industry. The global oil and gas pipeline market is expected to grow at a CAGR of more than 6% over the next five years.
Given this backdrop, we think energy infrastructure stocks Flowserve Corporation (NYSE:FLS), Enable Midstream Partners LP (ENBL), and Star Group L.P. (SGU) have the potential to generate significant returns through the remainder of this year.