Today’s Outlook and Trend for Oil Stocks
Consumers are happily filling their vehicles with the lowest-priced fuel since 2009, and homeowners who rely on heating oil to warm their homes are taking a sigh of relief from high prices of recent years as well. AAA reported US average gasoline prices at $2 as opposed to $2.48 at the same time just last year.
But what makes consumers happy doesn’t always have the same impact on the economy. While consumers and homeowners have more money available to spend on other purchases and freight carriers enjoy lower operating costs for diesel fuel, there are negative sides to be considered.
Oil company profits are reduced with prices per barrel closing at $34.73 on the NY exchange last week – even below the critical $35 guideline recognized as a threshold. Analysts and investors alike have expressed concerns that such low prices and margins could have the impact of weakening the global economy. Certainly the oil-producing regions are noticing an economic impact through a reduction in energy-related jobs. This impact is apparently not impacting every energy company as severely, as Houston-based Hilcorp Energy announced a $100K bonus for each of their nearly 1,400 employees as a result of achieving their goals for the year. Hilcorp is one of the largest privately-held oil and gas exploration companies in the US.
Stocks of companies heavily invested in gas and oil exploration and production have taken dramatic plunges as a result of the recent phenomenon of over-supply. With increased production in the US through new extraction techniques and Saudi Arabia’s increased production there is little need for exploration or purchases of drilling and pumping equipment,
What is the Outlook for Oil Stocks?
There are still sectors of the oil industry that can make out quite well until the market turns around, although analysts seem to agree that won’t begin to take place until the second half of 2016 or even into 2017.
Companies to watch for continued success are those vested not only in gas and oil production but that are also integrated with retail markets through refining, distributing, and production of petroleum-based chemical products. These companies such as Royal Dutch Shell, Chevron, ExxonMobil, and Total can profit from their vertical industry markets even when crude prices are low.
Investors need to keep in mind that although crude oil is certainly an investment in commodities that may not blend exactly with a particular investment strategy, it crosses many aspects of the global economy and may therefore experience gains – or losses – from external factors at work in uncertain times.
Oil Stocks and Day Trading?
Day traders can often benefit from volatility in specific markets, and oil is no exception. Buy-and-hold investors may see low share prices as the opportune time to get into oil stocks with the anticipated growth analysts predict for 2016/2017. Quality is part of the consideration in buy orders for these stocks as experienced companies that have weathered such storms in the past are likely the safest bets for the future as well. A little research into company history for a potential buy is a wise exercise in a volatile market such as today’s oil stocks.
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Disclaimer: SureTrader Blog is not intended for U.S. persons. Stock information is not to be viewed as buy or sell recommendations.