Why we are bullish oil

Stocks have become tricky over recent weeks and local reporting season has dominated intra-week swings of individual companies. Hence as we often say it's critical that subscribers understand both our views and reasoning for the path ahead. We are enjoying the feedback around our Monday mornings “Q & A" report format and urge all readers to keep the questions coming. One of our subscribers question was: "Why are MM bullish on oil and what's currently your favourite stock to buy for exposure?" Keep reading for our response, including accompanying charts and analysis.
Nicholas Forsyth

Market Matters

A very topical question, after our look at Woodside Petroleum (WPL) in the Weekend Report. Oil suffered a massive decline in prices in 2014-5 leading to panic in the oil sector with companies going into administration, or literally collapsing in price e.g. Santos (STO) fell ~75%.

Saudi Arabia attempted to halt the major competition coming from shale gas in the US by simply pumping more oil which brought down global energy prices. Many OPEC members have been decimated by the decline in prices, losing money on every barrel produced. The price war appears to have abated for now, and the market is going through a period of rebalancing. 

We are simply looking for oil to retest its best levels of last year ~$US60/barrel, not a particularly aggressive call considering price movements over the last two years. Looking shorter term, characteristics of sell-offs can be very telling – with a test below ~$US40/barrel being rejected.

We like the oil sector at current levels for further 8-10% appreciation. We hold Origin Energy (ORG) in the portfolio with a target of $6.20 and can buy Woodside Petroleum (WPL) for a shorter term trade

Crude Oil Monthly Chart

Crude oil.png

Get your questions answered by the Market Matters team. Each Monday they answer questions from four subscribers, sign up for your free 14-day trial today and you can submit a question which could be included in next Monday’s report:  (VIEW LINK)

1 topic

3 stocks mentioned

Nicholas Forsyth
Nicholas Forsyth
Market Matters

Market Matters is an online investment and share trading advisory service designed for those that want to take their wealth further. We specialise in advice for active share market investors, including those new to the markets or those with a Self...


No areas of expertise

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.


Sign In or Join Free to comment