(Bloomberg) — An oil glut coupled with a virus-induced free-fall in global demand sent energy stocks spiraling a year ago. Now, as the world begins to recover from the pandemic, oil bulls who stayed the course are enjoying big returns.“The scarier it is as a business, the better the investment prospects are,” said Josh Young, chief investment officer at Bison Interests LLC, referring to volatile periods in the money-management business such as last March. Canadian oil producers were clobbered a year ago, with even blue-chip names such as Suncor Energy Inc. losing two-thirds of their value in a matter of weeks. But with improved Canadian oil pricing and reduced concerns around pipeline capacity, Bison has been redeploying capital away from U.S. shale and into shares of Canadian energy companies including Tamarack Valley Energy Ltd. The Houston-based fund has risen about 90% this year.The OPEC+ decision last week to keep output largely unchanged along with an attack on the world’s largest crude terminal in Saudi Arabia briefly sent Brent oil futures above $71 a barrel early Monday. Futures in New York bounced between gains and losses on Tuesday, with West Texas Intermediate Crude around $65 a barrel.Investors are increasingly confident that any oversupply will be absorbed by soaring demand as more people are vaccinated and life slowly returns to normal.“The fear of peak demand is leading us to the reality of peak supply,” said Eric Nuttall, senior portfolio manager of the Ninepoint Partners LP energy fund in Toronto, which has gained about 70% this year.There was less planning involved in last year’s oversupply. Last March, coronavirus lockdowns began in western economies just as Saudi Arabia began flooding the market with oil in an all-out price war. Energy equities plummeted: At one point Canada’s energy index was down 53% for the year. It’s risen about 20% to start 2021.Then in January, in one of his first acts as U.S. president, Joe Biden canceled the Keystone XL oil pipeline, the type of move that would normally be a major setback for the patch. But with construction under way on other pipelines, the Canadian portion of Enbridge Inc.’s Line 3 online, and a drive for profitability through spending cuts, bulls have sent signals that this cycle may be different from its predecessors.Read more: Oil Producer Gets Payday in Alberta, Even With Wells ShutNuttall, whose holdings include MEG Energy Corp. and NuVista Energy Ltd., says he thinks Canadian energy stocks have more upside versus those south of the border, where a new Biden administration is more hostile to fossil fuels. At the same time, Canadian pipeline capacity is improving despite the Keystone XL decision. Nuttall said that small- to mid-cap shares have aided his fund’s performance this year.Generalist investors, who seek to own assets in a wide range of industries, have avoided oil and gas stocks because of price volatility over the last few years. Stabilizing prices could change that equation, Nuttall said, as margins increase and as other equities become overvalued.“We’ve selectively added energy” as energy companies cut spending amid rising demand, said David Picton, chief executive officer of Toronto-based Picton Mahoney Asset Management, which managed about C$8.9 billion ($7 billion) in client assets at end of February.In an interview, Picton called those investments “more of a trading call” because he’s not convinced that energy is a good long-term bet.Read more: Oil Industry Reels as Biden Targets Fossil Fuels in First Days(Updates with additional context in second and third paragraphs)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.