Crude Awakening: Oil Production and Prices Rise Amidst Global Turmoil

Oil Rig
Crude Awakening: Oil Production and Prices Rise Amidst Global Turmoil
May 17, 2018 Kevin Dixon
Oil Rig

Iran faces economic sanctions after the United States pulls out of the nuclear deal. Venezuela is collapsing under socialism, and OPEC may raise oil production in the Middle East.

While there’s a lot of heat and energy in business and politics around the world, what does this mean for investors in petrol stocks?

Good news: “Black gold” is in demand again, and investors are taking note.

Oil production for large and smaller energy companies is rising, and it’s a great time for traders and investors to get their hands dirty with smart action in the oil markets.

What has been driving oil prices up in the past few weeks?

Earlier this month, U.S. President Donald Trump, distrustful of Iran’s intentions in the Joint Comprehensive Plan of Action (JCPA), signed an executive order effectively ending the Iran nuclear deal. Sanctions against Iran immediately followed, which means U.S. companies cannot do business with Iran, and U.S. allies will be pressured to comply.

This decision will impact multiple industries, including manufacturing and defense, but the most obvious impact is on energy stocks.

Iran will not be able to sell its vast oil reserves to all interested parties, but there will be plenty of countries and companies willing to fill the void.

The United States has plenty of oil to go to market from shale oil drilling and production, and domestic drilling in the Permian basin of Texas and New Mexico. Oil production in America is at an all-time high, and U.S. energy companies will not be shy in getting their products to eager global consumers.

Elsewhere, Venezuela is melting down in political, economic and humanitarian collapse. Once one of the largest oil-producing countries in the world, Venezuela is now in freefall. Other countries will willingly fulfill the oil demand left in Venezuela’s wake.

With so many global current events impacting petroleum industries, here are some energy stocks to keep an eye on in the coming weeks and months:

XLE – An exchange-traded fund made up of energy stocks, such as Exxon and Chevron. There has been quite a bit of buying in the past few days, and that is likely to continue.

XOP – Oil and Gas Exploration and Production companies. Bullish movement above $42 with 52-week highs being set throughout the past week.

Total SA (TOT) – A French oil company that would like to skirt sanctions and continue doing business with Iran. According to The Wall Street Journal, Total SA will cease working on an Iranian natural gas project, and may have to divest $1 billion altogether in that field. Those investments may take root outside of Iran.

Petrobras (PBR) – A Brazilian company that may take advantage of Venezuela’s absence in the oil market. Their stock jumped from $13 to $17 in less than a week — more than a 20% gain!

Valero (VLO) – I love this stock! Setting new highs around the $116 mark. We might be looking at some long calls until September.

ConocoPhillips (COP) – The company has been bullish for months and is now setting 52-week highs.

Stocks that are moving the most are in oil and gas exploration and production — Devon Energy (DVN) and Marathon Oil (MRO). Look for the price action to be heavy with these and similar oil production industry companies, such as Halliburton (HAL).

Bottom line: Oil fuels many businesses, including the companies that extract it, refine it and transport it around the world. Take advantage of the opportunities in front of you and find the energy to keep your investments growing.

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