How Long Will Oil Prices Stay Up?
Big oil companies like Exxon have not been great investments in recent years as the world pivots to electric vehicles and increasingly tough environmental regulations. When oil prices peaked around 2014 Exxon Mobil sold for $102 a share and just before the Covid crash it had fallen to $69 a share. Of course it fell like everything else with the crash to hit $34 a share around the time when drillers were paying folks to take their oil! Then it only came back to $62 a share while the economy recovered. Today Exxon Mobil trades in the $90 range again but for how long? How long will oil prices stay up.
Sanctions on Russia and Unhelpful Saudis
At Top Gun Options we pay attention to the DRINCs. DRINC is our acronym for Democrats who tend to spend too much and Russia, Iran, North Korea, and China all of whom have the potential to cause trouble in the world and havoc in the markets. In regard to oil, China’s misguided zero tolerance covid policy is hampering their economy and helping keep oil from going even higher. Meanwhile OPEC+ just met and agreed to a miniscule increase in production which will not help bring oil down. Russia is likely to continue its war in Ukraine, grinding away, destroying towns with their artillery, and kidnapping Ukrainians in held territories to take back to Russia to indoctrinate. This situation is the main reason that oil prices are up and will stay up for the indefinite future despite a slowing US economy due to the Fed raising interest rates to stem inflation.
Is Trading Options on Big Oil Profitable?
When choosing a stock or index for trading options we generally look for volatility and volatility that we can reasonably predict. Because we always hedge our trades our predictions need not be infallible but the better our predictions the greater our profits. Supply and demand drive oil prices and big oil profits over the long term just as with any business. Over the longer term the slowing Chinese economy will tend to drag prices down. The swing to renewables and electric vehicles will likewise drive oil prices and big oil share prices down over time. But right now oil and big oil are both up and there is no immediate price relief in sight outside of a global economic meltdown. Meanwhile, the Exxon stock price fluctuates with speculation about what OPEC, OPEC+, and the Russians will do. As of this writing Exxon stock has gone from $89.78 on the morning of July 27 to $97.13 on the morning of July 29 to $94.02 on the morning of August 3 after OPEC+ announced their miniscule production increase. While the stock price for Exxon Mobile will likely stay up for the next months (or years) as the war in Ukraine grinds on traders will take it down quickly as soon as there is evidence that peace will break out in Ukraine. To a degree predicting the price of oil and the short term price of a stock like Exxon Mobile is a bit like trying to read the Fed and interpret “Fed speak” in which the current Fed chairman tries to say a little as possible to upset markets when talking to Congress. Longer terms options (LEAPs) are more appropriate for trading the likely longer term fall in Exxon’s share price as the war in Ukraine and sanctions finally get resolved.
Meanwhile, this is not a good time to be trading alone in the current market. If you are not already a member sign up and join one of the trading squadrons at Top Gun Options where we potentially print money no matter which way the market is heading.