Morgan Stanley urges buying energy stocks after oil pullback

Morgan Stanley has urged investors to buy energy stocks after the recent sharp decline in oil prices, arguing that the pullback has created a compelling entry point. The bank's analyst Devin McDermott said the selloff "creates an opportunity to add exposure to Majors and high-quality E&Ps," noting that oil producer valuations are now pricing in crude at levels well below current market prices.

The call comes after WTI crude fell 29% since early April, when the U.S. and Iran first announced a ceasefire. The decline accelerated after President Trump's subsequent actions, pushing prices down by roughly $30 per barrel. According to Morgan Stanley, the average implied WTI price embedded in energy stock valuations is approximately $66 per barrel, about 13% below the 12-month forward strip of around $75 per barrel. This disconnect suggests that energy equities are undervalued relative to the underlying commodity outlook.

For oil and gas traders, the Morgan Stanley note highlights a potential divergence between physical crude prices and equity valuations. While WTI has tumbled, the bank sees the selloff as overdone, creating a buying opportunity in high-quality producers. NowPrice live fuel prices and charts show how the market is reacting to the geopolitical developments and the subsequent analyst calls. Traders should watch for any further ceasefire developments and upcoming inventory data, which could provide additional direction for both crude and energy stocks.