Wall Street is getting increasingly bullish on energy stocks - and one expert says the overlooked sector could surge 66% if oil prices spike

• The energy sector has gained 17% in 2021 on expectations of an economic rebound and oil market recovery.
• Energy is the best-performing sector in the S&P 500 year-to-date.
• Fundstrat's Tom Lee says energy could surge 66% if oil prices spike to $80 a barrel.
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Wall Street is growing increasingly bullish on 2020's worst-performing sector: energy.

The sector has surged 17% in 2021 on expectations of an economic rebound and oil market recovery, and analysts anticipate further gains. It's also the best performing sector in the S&P 500 year-to-date.

Nuveen's Saira Malik said on Tuesday that energy-related stocks have bottomed and should continue to improve on a relative basis. Meanwhile, equity strategists from Jefferies highlighted how energy has remained a "popular choice" among investors, with inflows totaling 13.5% of its asset base year-to-date.

Now, Fundstrat's Tom Lee says the sector could surge up to 66% if oil prices spike to $80.

The firm's head of research said in a Tuesday note that despite sizeable energy gains in 2021, barely any of his institutional clients are talking about energy stocks. The 17% YTD gain in the sector has risen without any institutional support, while oil, which is loosely linked to energy stocks has also gained, said Lee.

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Looking at the relationship of oil and energy stocks since 2010, Lee says the Energy Select Sector SPDR Fund ($4) should be 42% higher than current levels if oil remains at $60 per barrel.

If oil prices rise further to $80, XLE should be at $75, a 66% upside from current levels, Lee added. XLE closed up 2.55% on Tuesday.

"So the interesting takeaway is that energy stocks still seem to have comparative upside given the sizable move in crude oil prices," Lee said.

$4 as freezing-cold weather battered Texas's energy infrastructure, leaving millions without power.

WTI crude oil>$4 was up 0.82% to $60.23 per barrel as of 3:45 pm ET. Meanwhile wholesale energy prices skyrocketed, at times above the market cap of $9,000 per megawatt hour, compared to prices of around $25 to $50 per MWh before the winter storms.