If you’re like most oil investors, you’re nervous. Oil stocks have taken a tumble this year. And, many analysts are wondering whether they’ll recover. Investors have lost thousands — millions — and many won’t get back up. Will you? Here’s what savvy investors know that you don’t.
According to http://moneymorning.com/tag/oil-prices/, predicting oil prices isn’t as hard as some experts would have you believe. With global prices declining drastically over the last year, many investors find it difficult to believe that there’s any money to be made in oil. The reality is that there is: lots of it.
Consumers make out very good because lower oil prices mean that it’s easier to fill the gas tank and get to work.
From 2010 to around Jun of 2014, oil prices stabilized about $110 a barrel. But, after that, prices dropped significantly, to $30 per barrel.
Even though the spike in prices in the early part of 2016 caused some investors to plow back into oil, prices haven’t really gone anywhere. Many speculators are taking the view that prices will be on the rise, with Bloomberg reporting that options trading in West Intermediate (WTI) oil futures long bets pushed the price of oil up slightly. In reality, the price of oil has fallen by 0.7% to $29.25 per barrel in Singapore. That’s something that worries most long-term investors, and even many speculators.
Oil prices in the U.S. are down 20% this year.
Brent price are down 15 percent too, as investors worry about oversupply in crude. And, that doesn’t touch the geopolitical factors.
The Geopolitical Factors
Price increases in oil are fuelled by news of Saudi Arabian-Russian talks in Doha, Qatar. The discussions focused on ways of dealing with the glut in oil. The International Energy Agency (IEA) has also increased its estimate of global oil supply by 250,000 barrels daily. This hints at the idea that oil prices are going to remain low for the rest of 2016.
But, that doesn’t mean you should stay out of oil. Almost every classically-trained investor knows that a low price is a buying opportunity — especially for cyclical commodities like oil.
Companies That May Rebound
If you’re willing to hold out, you can make money by buying now and waiting for the stocks to rebound.
ExxonMobil – How could you not like this oil company. When you think oil, you almost have to think Exxon. It’s the supertanker of energy stocks, and one that earns money from both oil and gas production. It’s traditionally treated its shareholders very well, paying a handsome dividend yield. Its reported 38% loss in revenues in 2015 worried many investors, but it has also gotten leaner and reduced operating costs. ExxonMobil is also one of only 3 publicly traded companies with a higher credit rating than the U.S. Government.
And, while its oil and gas production isn’t going as fast or as high as smaller companies, it’s still expecting to increase production by 5% from those dreary 2015 levels.
It pays investors to wait for a rebound with its very generous dividend. And, this is a company serious about paying it. Even with a 46% loss in 2015, it raised its dividend by 5.8%, showing its commitment to long-term growth and strength in the face of short-term losses. It’s maintained its dividend increases for 33 years.
Chevron – Another big name in oil has made massive bets in the last few years. It’s spent more than $107 billion into various projects from liquefied natural gas in Australia to oil wells off the coast of West Africa.
Several projects are now up and running, and the payoff to investors is promised to be forthcoming. Wall Street sees Chevron’s earnings per share declining by 28% this year, to a paltry $2.50.However, the company expects to more than double its profits in 2017, boosting earnings per share to $5.31.
Occidental Petroleum – If you haven’t heard of this one, you’re not alone. But, it’s one of the largest domestic energy companies. It’s a mini-major with a mix of oil and gas production, chemical refineries, and pipelines. Its balance sheet is pretty healthy, and it has $6.9 billion in long-term debt which is offset by $2.5 billion in cash.
Most of its domestic drillers are spending more and more on capital projects that don’t quite have sufficient cashflow coming in yet. But, they should be able to boost up production and produce that cash for investors soon. With a dividend of 4.9%, it’s an attractive play for many investors.
Emma Miah has a background in the finance industry, and takes a keen interest in the stock market on a personal level. Keen to show people, especially women, that stocks and shares are not just something for the elite business man to dabble in, she writes articles about the stock market which appear around the web.