After a year! Energy stocks in the United States rise again.

US energy stocks surged in August, reclaiming market leadership for the first time since the end of 2022, when energy stocks were among the few areas performing well in a volatile market.

According to Dow Jones Market Data, the S&P 500 Energy sector rose 9.7% in the first 29 trading days of the third quarter, marking the most promising quarterly start since the fourth quarter of last year.

Rising oil and gasoline prices have driven up the stock prices of major US energy companies. Exxon Mobil's stock price has risen 4.2% since the beginning of this quarter to $111.69 per share. Exxon Mobil is the largest energy company by market capitalization in the S&P 500 index, with a market value of about $450 billion.

Other oil and gas companies have seen even greater increases in their stock prices. Apache Corporation, an oil and gas exploration company, has risen 31.4% since the beginning of this quarter, making it the best-performing component stock in the S&P 500 Energy Index.

Wall Street: Potential momentum shift in oil and gas stocks

Some institutions on Wall Street have analyzed the flow of funds and concluded that the sell-off of energy stocks this year is showing signs of a shift.

Data collected by Bloomberg shows that investors have withdrawn nearly $11.5 billion from about 80 US ETFs tracking the energy industry so far this year, surpassing the total for all other industries. Among them, the Energy Select Sector SPDR Fund, which tracks energy component stocks in the S&P 500 index, has seen $3.7 billion in outflows.

In sharp contrast, nearly $35 billion flowed into these ETF products from 2020 to early 2022, when oil prices soared after the Russia-Ukraine conflict.

Now, oil prices are soaring again, reaching their highest level this year. Analysts say this is because the US economy has shown resilience in the face of Fed rate hikes.

FactSet data shows that international oil prices have risen for seven consecutive weeks. WTI crude oil futures rose 0.28% to $83.05 per barrel on Friday, and on Wednesday, the futures closed at $84.40 per barrel, the highest closing price this year.

Edward Moya, Senior Market Analyst at forex dealer OANDA, said:

"As energy traders remain overly convinced that the oil market will remain tight, crude oil prices are recovering their upward momentum."

Todd Sohn, Managing Director of ETF and Technical Strategy at renowned financial institution Strategas Securities, believes that this may indicate that the worst is over for energy stocks.

Sohn said in an interview:

"(Even) against the backdrop of outflows, you start to see some improvement in the momentum of the energy sector, but it's very subtle. It's not a signal in and of itself, but it helps people think that sentiment is improving. From this perspective, it's becoming a game changer."

Not only Strategas has seen the potential momentum shift in oil and gas stocks. As of mid-May, energy stocks have been the worst-performing sector in the S&P 500 this year, with a decline of about 10%. However, as of Tuesday's close, the index has only fallen by 0.7%, while the S&P 500 has risen by 17% during the same period.

Investors have been attracted by the low valuations of energy companies, hoping to diversify their investments beyond the large tech stocks that have led the market surge this year.

James Hodgins, Managing Director and Portfolio Strategist at Stifel, said:

"In the first half of this year, large-cap tech stocks in the Nasdaq were overbought, while energy stocks were oversold."

He believes that with the rise in oil prices, the energy industry has "greater room for development."

Tech stocks underperforming in this quarter

Since the beginning of the year, tech stocks have been undisputed leaders. According to FactSet data, the information technology sector has risen by 35.7% year-to-date, second only to the communication services sector, which has risen by 41.1%.

However, tech stocks have been lagging behind since the start of this quarter. Since early July, the S&P 500 Information Technology Index has fallen by 4.5%, making it the worst-performing sector during the same period.