The market is now anticipating that oil will reach $100 per barrel. The next question, though, is, will it go there? It’s been a heyday for oil bulls after Brent bottomed out at $70 earlier this year. The strength of the commodity is fueled by the continuous pressure on supply due to Russia and Saudi Arabia's export and production cuts. Furthermore, some analysts expect oil to trade in the triple digits before the year ends.
However, others still need to be convinced that it will hold that price due to its effect on inflation and the need to keep rates high. While this presents a dilemma for some, it also allows short-term traders to buy oil or use oil stocks as a proxy for their bullish sentiment on the commodity. Here are three oil stocks that are opening up to buying opportunities now.
Black Stone Minerals, L.P. (BSM)
Black Stone Minerals, L.P. is an oil and natural gas company that owns and manages several mineral interests in the United States. This includes 1.6 million gross acres of overriding royalty interests (ORRIs), 1.8 million acres of nonparticipating royalty interests (NPRIs), and approximately 16.8 million gross acres of mineral interests. BSM has a unique exposure to the oil market; since it owns stakes in oil-bearing properties, it does not have to bear a lot of up-front expenditure for oil resource production. Instead, it acts as a landlord earning its share from the profits the lands produce. With the continued bullishness in oil, Black Stone Minerals may also be looking at an increase in revenue.
Where is the price now?
BSM is currently trading in the middle of its tight range between $16.50 - $18.24. Prices hover near its dynamic support (50-day simple moving average - green line) while its 14-day RSI slumped below the 50 line. This gives traders and investors a chance for another entry on the lower end of the range once the price settles and clearer trading signals are seen.
Exxon Mobil Corporation (XOM)
Exxon Mobil Corporation is an oil and gas company that explores and produces crude oil, natural gas, and other petrochemical products. XOM operates in three main segments: chemical, energy, and specialty products. The company is one of the top players in the industry and has assets located worldwide. Exxon recently acquired Denbury to accelerate its low-carbon solutions business and provide a more robust product offering on its decarbonization propositions.
Should you trade XOM?
XOM is currently trading around its short-term high while its dynamic supports (simple moving averages) are catching up. Its 14-day RSI is presently tightening and is showing signs of a potential breakdown if prices don’t hold at the top of its range. Should prices move down and undergo correction, traders can take the opportunity to buy XOM at lower prices before it continues into its bullish momentum.
ConocoPhillips (COP)
ConocoPhillips is an energy firm exploring and producing crude oil, natural gas, and natural gas liquids (NGLs). The company’s specialty lies in its upstream business on hydrocarbon exploration and production. However, its crude oil operations are currently benefitting from the rise in oil prices. Analysts love COP; the majority covering the company has given it a “Buy” rating , and it’s expected to reach a potential high target price of $151.00 based on analyst estimates in the next 12 months.
Are we in for a breakout?
COP is currently trading near its short-term high at $126.00. The area shows signs of a potential correction after its bearish candlestick close from yesterday’s trading. Its 14-day RSI also shows signs of slowing down, which can give oil bulls a chance to buy it near support.
Final Thoughts
Buying stocks related to a commodity is a great strategy for investors who want exposure to the commodity without the need to hold it. However, they must remember that some commodities are susceptible to news information and may need additional monitoring as many factors affect their pricing.
On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
