Energy stocks soared in March

Energy stocks popped in March, with the Energy Select Sector SPDR Fund (XLE) up about 11% for the month. The stocks have benefited from the rise in oil prices (CL=F, BZ=F), which have been fueled by concerns about supply, especially after Russia ordered output cuts.

Yahoo Finance's Ines Ferré breaks down what's happening in the sector.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Stephanie Mikulich.

Video Transcript

[AUDIO LOGO]

JARED BLIKRE: March has been a solid month for the S&P 500, which by the way, reached a record high today. But it's been an even better one for oil and gas-related stocks. Ines Ferre has been looking into this and she joins us now. Ines.

INES FERRE: Yeah, Jared. And March was a great month for energy stocks. And, in fact, the sector has been the best performing sector of the S&P 500 for the month of March. And year-to-date, it's the second best performing sector on the S&P 500.

Let me show you on our Wi-Fi interactive. You can see XLE is actually the third performing. But still up there along tied with financials, up 11.4% for XLE. And, of course, energy stocks have been tracking oil prices, which have been higher this year.

You've got WTI that's up almost 15% year-to-date. You've got Brent Crude that is up about 13% year-to-date. And Morgan Stanley recently lifted its forecast for Brent expecting $90 a barrel by the third quarter.

So analysts at Morgan Stanley have also upgraded the energy sector when it comes to equities to overweight basically talking about how energy stocks will play catch up with those oil prices gains and also talking about a reflation trade expecting the Fed to cut rates this year stimulating the economy. Demand for energy is expected to grow with that. And also, expecting the possibility of earnings growth.

So if I pull up this year-to-date chart with the big performers here, ExxonMobil up 15% year-to-date. You also have Diamondback energy. That's up 26% year-to-date. And pioneer up 15%. These are some of the biggest players. Of course, this all lends itself to the theory that the market rally is broadening, Jared.

JARED BLIKRE: Yes is it broadening or not. Well, we talk a lot about oil. At least you talk a lot about oil. I used to.

I know you follow OPEC. And we get these reports on a monthly basis. It updates whether or not they're going to increase production, cut production. Where do we stand right now? Any expectations that OPEC Plus might be some swing factor in the supply picture going into the end of the year?

INES FERRE: Yeah, look, OPEC Plus as analysts have been saying they will be reluctant to cut or to ease those production cuts. But you have demand that is in the picture here. So it looks like these oil prices are pretty range bound. The fact that you have analysts that, in fact, increased their price target, it looks like they're expecting them to continue with these for the near term.