The Best Oil Stocks to Buy as Oil Prices Plummet
If you’re looking for the best oil stocks to buy, you’ve come to the right place.
Because at current levels, oil is trading at a very nice discount.
As a result of Trump’s trade war, we’ve seen oil prices plummet 30% since the start of the year. Recessions fears and increased tensions between the U.S. and China now have oil sitting at four-year lows. And they could go further.
But here’s what you have to understand …
In order to “drill, baby drill,” as Trump likes to put it, oil prices must average no less than $60 a barrel. Otherwise, there’s no profit. And as you can probably imagine, oil companies don’t tend to drill just for fun.
Hell, oil has to average at least $65 for oil companies to even begin to drill new wells.
So as you can imagine, oil companies aren’t too pleased with how things are playing out right now. Particularly when you consider that some of the latest predictions have crude falling below $60 this year.
Goldman Sachs actually has WTI prices falling to $58 by the end of the year And $51 by the end of next year. That’s how bad this could get. Of course, eventually, oil prices will inch back up to $65/$70 per barrel again. But how long that will take is anyone’s guess.
To be fair, it wouldn’t take much more than a flare-up of violence in the Middle East to move the needle. But behind the backdrop of recessionary pressures, a spike in oil prices instigated by geopolitical events would likely be short-lived.
So as an investor, how do you play this?
The Best Oil Stocks to Buy – or Short!
If you’re like me, and you believe oil prices will ultimately rebound and head back up to $70, you probably want to own some of the bigger names in the space …
- ExxonMobil (NYSE: XOM)
- Chevron (NYSE: CVX)
- Shell (NYSE: SHEL)
But to be honest, at no time soon do I expect to see oil prices revisit the 2025 highs we saw earlier in the year. Back when oil futures were clocking in at around $80. And that means, you could actually make a few bucks by playing the short game with an inverse ETF.
While these inverse ETFs can be risky, they can also be quite profitable. Assuming you time your trades just right.
To give you an example of what I mean, check out this recent action with the inverse oil ETF ProShares UltraShort Bloomberg Crude Oil (NYSE: SCO) …
Inside of one trading week, SCO gained 46.2%.
This, while oil futures fell more than 21%.
Indeed, in the right conditions, an inverse oil ETF can prove to be quite profitable.
If Goldman’s analysts are correct about where oil prices are heading, SCO could deliver additional gains in excess of 30% this year. But I wouldn’t pull the trigger on this one unless you feel confident that oil is, in fact, heading towards $55 or lower.
Dave
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