Oil investors got more good news this week when the U.S. Energy Information Administration reported another 4.6 billion barrel drop in U.S. crude oil inventories, suggesting further rebalancing of the oil market. With oil prices at their highest level since 2015 and OPEC committed to maintaining its production cuts in 2018, it may finally be time for investors to think about buying Chevron Corporation (NYSE: CVX) and other big oil stocks.
WTI crude oil briefly hit a major psychological milestone earlier this week when prices topped $60 per barrel on news of a pipeline explosion in Libya. The move marked the first time crude oil traded above $60 in more than two and a half years. WTI crude oil traded above $107 per barrel as recently as mid-2014 before a global supply glut triggered a severe crash.
Libya is one of two OPEC members that is exempt from the organization’s recent agreement with Russia and nine other nations to curb global supply by 1.8 million barrels per day throughout 2018 to help alleviate global oversupply and support oil prices.
Wolfe Research analyst Paul Sankey says limited supply coupled with rapidly growing global demand is a winning recipe for oil stocks. “That’s what’s made the underperformance of the sector so disappointing this year, but we really expect demand to keep raging,” Sankey said on CNBC.
“We prefer Chevron over Exxon, and we probably would like the yield of the European guys as well because we think generally the market is going to be in good shape next year,” Sankey said.
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