Some recent energy prices have dropped, but don’t panic! You don’t want to sell your oil stocks yet. In fact, many shrewd investors are now interested in purchasing more energy stocks, because they anticipate the sector will only grow more in value now that prices have fallen. Let me tell you why stocks in the oil industry are still good to buy and how you can get in on this gold mine for yourself by buying stocks in the industry.
Bill Smead, chief investment officer at Smead Capital Management, says that although oil prices have fallen sharply from their recent peaks, oil stocks are still a good investment.
That’s because energy prices are likely to stay high or even increase further, he told CNBC’s “Street Signs Asia” on Thursday.
He called crude prices’ slide “the first significant correction” of a bull market that began in the spring of 2020 after prices crashed.
“You have this huge move, you go from $20 a barrel to $120 and then you pull back — and now people are going, ‘Oh yeah, that’s all over, that’s going to cure the inflation right there,’” Smead said.
However, a few factors hint that prices are going to rise.
In the US, we will need to replace 180 million barrels of our Strategic Petroleum Reserve which we had depleted in order to meet demand, and we’re having trouble supplying oil at this time.
“What happens when China’s economy opens fully … just get out of the quarantines and the demand will increase again?” he asked, suggesting that it may only take a few months for them to return to normal.
Spurred by covid flare-ups in China, the government is in lockdown mode and it’s being reported that they’re also having an adverse effect on China’s energy consumption.
When more movement restrictions are eased, demand will likely return.
Smead continued, We like oil stocks here. You can buy them here. Warren Buffett is buying them here.
This year, Brent crude futures soared above $120 per barrel and U.S. West Texas Intermediate futures rose above $90.88 per barrel, respectively.This may not have any statistical significance, but both scores are about 40% higher than last year.