How To Play Oil’s New Reality
Dear Rundown Reader,
Earlier this year we noted that oil could soon breach the $70 mark.
As we write this morning, oil sits at $70.81.
One year ago a barrel of crude went for $49.46.
There’s many reasons why the price of oil has risen so quickly.
And there’s also many ways to make money off oil’s resurgence.
There are also ways to lose.
Today a look at oil’s new reality. And how to play it accordingly.
Your Rundown for Wednesday, May 9, 2018…
Trump Dumps Rouhani — Oil Surging
Financial markets have shifted in a big way this year.
One of the biggest shifts is in favor of energy stocks. Specifically oil.
According to CNNMoney: “A 50% spike in the price of crude over the past year has set off a celebration for Big Oil.”
Scaled back production from OPEC is one catalyst.
Another is increased demand from emerging markets like Asia.
And now that it’s confirmed Trump has pulled the U.S. out the Iran nuclear deal, oil has third sustainable tailwind.
According to Reuters, “oil prices jumped back to 3 ½ year highs on Wednesday after President Donald Trump pulled the United States out of an international nuclear deal with Iran.”
The news is icing on the cake for big oil’s resurgence.
Oil’s chart shows us there’s tons of money out there to snag.
According to CNNMoney, “Wall Street is already banking fatter profits” off the likes of ExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX).
But all ships are rising.
According to market expert Kenny Polcari: “The energy ETF – XLE has moved up alongside the increase in oil prices… up 17% since February”
And our own income expert Mike Burnick is also high on energy plays, including Marathon Oil Corporation (NYSE: MRO). Since the February sell-off MRO’s been on a tear, rising over 30%.
But higher oil prices do have negative consequences. Namely higher gas prices. And this is a drag on some industries.
As such, Mike recommends shifting your money away from consumer staples like Clorox (NYSE: CLX), Hershey (NYSE: HSY) and Haynes (NYSE: HAYN).
Another sector Mike recommends steering clear of right now are industrials. And he isn’t the only one.
CNNMoney notes: “Chemicals makers are particularly vulnerable because they use crude oil as a major ingredient.”
The bottom line is, if you’re heavy into industrials and consumer staples, consider shifting your money elsewhere.
Higher oil prices are the new reality.
Now, turning to the markets this morning…
Market Rundown for Wed., May 9
S&P 500 futures are up 7.00 at 2,677.
Oil’s up $1.75 to $70.81.
Gold’s up $0.70 to $1,314.
Bitcoin goes for $9,268 this morning, according to CoinDesk.
We’ll talk again on Thursday.
For the Rundown,