Investing in Oil Stocks: Oil's Close Above $60
By S.R. Nunnally
For the second time since the new year, oil prices have closed above $60 a barrel. The oil bull in me is rejoicing.
With the slight correction in prices during the past seven trading days, oil has established a strong support level at around $57.50. From here, oil prices can climb to $65 before encountering strong resistance.
On Feb. 9, 2007, oil strikes in Nigeria shut down a portion of the country's production. That sent oil prices as high as $61.37, and oil eventually closed at $60.63.
Today, the catalyst is our buddy Iran.
This isn't the first time, nor will it be the last that Iran has made oil investors nervous. In fact, Iran's been leading us along by the nose, so it would seem, promising to talk about halting its nuclear program and then changing its mind.
This time, Iran rejected the Security Council's demands and is pushing its nuclear program forward.
Adding to these jitters was an unexpected draw on refined product stocks like gasoline and heating oil. The Energy Information Association (EIA) reported gasoline stocks down by 3.1 million barrels compared to last week's inventory. Heating oil stocks fell by an even greater amount: 5 million barrels.
Investing in Oil Stocks: How U.S. Oil Companies Are Reacting
Investing in Oil Stocks: How U.S. Oil Companies Are Reacting
With oil prices back above $60 a barrel, oil stocks, both producers and services are up across the board for the day. Here are some major hitters:
Schlumberger (SLB:NYSE) up 2.2%…
Halliburton (HAL:NYSE) up 2.7%…
Sunoco (SUN:NYSE) up 1.9%…
And the oil ETFs are following suit:
Oil Service HOLDRS (OIH:AMEX) up 1.8%…
Energy Select Sector SPDR (XLE:AMEX) up 1%…
The move's not done yet, and there are still some good deals to be had for those who want to invest in oil stocks, especially since some have been beaten down by lower quarterly earnings.
As these lower earnings are due to lower oil prices, not to some inherent flaw within the company, this could be the start of a rebound for many oil stocks.
Some of our favorite conservative stocks are:
Global SantaFe (GSF:NYSE)
Noble Corp. (NE:NYSE)
ConocoPhillips (COP:NYSE)
Chevron Corp. (CVX:NYSE)
Want more bang for you buck? Take a look at these two aggressive companies:
Delta Petroleum Corp. (DPTR:NASDAQ)
Petrohawk Energy Corp. (HAWK:NASDAQ)
Related Links:
Falling Oil Tops: Since Nigeria cut its output on February 9, and oil topped $60 a barrel, we've seen a decreasing willingness to test the $60 mark.
Soft Oil Positioning: Oil prices have experienced weakness during the first two months of the 2007 calendar year.
$30 Oil: Up your portfolio's energy insensitivity.
Related Resources
Energy shares rise: The energy sector moved cautiously higher after federal data Thursday. - MarketWatch
Iran Missed Deadline: MARKET SNAPSHOT: U.S. Stocks Drop As UN Says Iran Missed Deadline - Dow Jones Newswires (via CNNMoney)
Oil Prices Hover Below $61 a Barrel: Oil Prices Sit Below $61 a Barrel After Report Shows Declines in Gas, Heating Oil Inventories - AP (via Yahoo!Finance)