For some, oil stocks are as passé as disco.
After all, the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) soared 132% between April 2021 and June 2022. But it has slumped 21% since then.
Given that, plus the stratospheric potential of renewable forms of energy, like green hydrogen, why would I still consider oil a buy?
Like a group of partying college kids at midnight, oil stocks may have just gotten a “second wind…” and a major rally could be imminent.
Here’s why I think it still belongs in your portfolio.
What price will TSLA, NVDA, and AAPL be in a month?
During a recent special event, we launched our new breakthrough A.I. algorithm called An-E… and showed many of its past predictions and just how accurate they were (often precise to within a tenth of a percent).
During the event, we also showed what An-E’s predictions were for three of the most widely held stocks on the market one month into the future.
You can see what those predictions are by going here.
Geopolitics Limit Supply
On Tuesday, Bloomberg reported that oil production for the Organization of Petroleum Exporting Countries (OPEC) fell in April due to an Iraqi pipeline suspension and Nigerian labor strike. In fact, its output was the lowest in almost a year, declining by 310,000 barrels a day.
Those geopolitical issues and continuing sanctions against Russia continue to limit supply, along with weak economic data coming out of China and banking-collapse fears. OPEC+, which includes Russia, instituted a voluntary output cut of around 1.16 million barrels a day, beginning this month.
These supply limitations should drive the price up. In fact, global crude oil demand will hit record levels by the end of this year, according to new estimates from the International Energy Agency (IEA).
Because the IEA also anticipates flat supply growth between now and year-end, the Paris-based agency expects the oil market to fall into a 400,000-barrel-per-day (BPD) deficit soon, then swell to a two-million-BPD deficit in the second half of the year.
There is no significant U.S. supply boost on the horizon… and that’s an important factor in the global crude market as well.
A fresh wave of investment in exploration and production (E&P) could boost output somewhat, but very few U.S. oil companies are expressing any intention to do so.
Earnings Season Benefits Oil and Gas Companies
As we close out earnings season for the first quarter of 2023, most oil companies that have reported are sitting pretty. But the question is whether or not they’ll continue to profit in a greener world. As companies like BP plc. (BP), Shell plc (SHEL), and French oil giant TotalEnergies SE (TTE) report earnings that far surpass expectations, investors are being rewarded with buybacks, and – critically – they are using them on investments.
Those investments are key to determining the winners and losers over the next few decades.
The Pivot to Green Energy
As the world continues to invest in green energy in the quest to get to zero carbon emissions, oil and gas companies that haven’t stopped to consider this diversification will be left in the dust.
I have sung the praises of TTE in one of my elite trading research services as a company that is poised for success. It’s investing in not only traditional forms of energy, but also is expanding into wind and solar electricity, plus is developing other biofuel solutions.
In October 2022, I recommended a covered-call trade on TTE that recently resulted in a 21.6% gain in 121 days! Here’s what I told readers last fall:
[TTE] is a fashion-forward, energy-transition company. The company’s management understands both what has been and what will be – and they intend to maximize profit from both.
Specifically, management is pursuing a long-term strategy to reinvest the robust cash flows from Total’s legacy oil and gas operations into renewable energy projects and technologies.
In other words, this company is prepping itself for success in the coming renewable energy boom.
More Profitable Renewable Energy Plays
TTE isn’t the only company that stands ready to profit from investing in the renewable energy industry. I’m enthusiastic about not just companies abroad capitalizing on renewable energy plays – I’m looking closer to home for those opportunities.
Companies that supply the electronic vehicle industry with the raw materials and production facilities it needs to get EVs on the road stand to profit. One swath of the U.S. recently was nicknamed “The Battery Belt” due to the rich sources of battery metals needed to power electric vehicles.
Don’t miss out on the opportunity to get in on the ground floor of this megatrend. Get all the details – and my #1 pick in the sector – here.