As the stock market got mauled by the bear in 2022, one sector held its own: Energy. The trend has reversed in 2023, as the sector has been whipsawed by fluctuating oil prices.
But there’s another twist to this trend. And understanding it will help investors navigate moves into 2024. While energy prices have been declining even as OPEC nations have cut their production, this new trend hints at the profits available now.
That trend is the rise of U.S. oil production. It’s helping offset the fluctuations occurring from OPEC, as well as the potential dangers posed by a cutoff from nations such as Russia or a shutdown of global shipping lanes like the Red Sea.
That means that U.S. energy producers are feeling the boom times, even as the global energy market is taking a more cautious view. U.S. major oil producers could be the biggest beneficiary, even those that also have global operations.
Chevron (CVX) is down 12 percent over the past year, with revenues down nearly 20 percent amid declining energy prices.
But shares trade at 10 times earnings, and the oil major has nearly $6 billion in cash on the balance sheet as a cushion.
Action to take: Shares look like a contrarian buy here. At current prices, Chevron pays a 4 percent dividend as well.
For traders, shares have started to trend higher after bottoming out in recent weeks. The April $160 calls, last going for about $4.25, stand to see mid-double-digit returns if shares can break higher from here.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.
