Over the past few months we have seen the price of oil and energy stocks pull back. Seasonally both tend to dip just about every single year in the Fall and then go up into July and the summer driving season. I believe we have seen both put in a recent bottom and they appear to be turning up to start a rally.
First take a look at the price of oil.
The price of oil traded in a range of $65-$100 in the first half of 2023. After hitting on the $100 price point this past summer it dipped back down to $70 a barrel.
It now appears to have stabilized around that level and is turning up.
One thing you should know is that Saudi Arabia needs oil prices to trade in the $80-$88 range for its national government budget to balance.
They want a floor on oil prices here.
And they are powerful, being the biggest player in the OPEC cartel.
So, I think they can manage keeping oil above the $65-$70 range for the rest of this year.
Goldman Sachs expects oil to trade between $70 and $90 for 2024, and that’s after they account for a boost in US oil production and even more Saudi oil coming on the market later.
That sounds about right.
No matter getting future price predictions exact, energy stocks appear to have bottomed.
Take a look at the XLE ETF.
I think XLE could be bought here with a stop loss order put on it below its December and January lows, which should be a double bottom right under $80.00.
You can find this basic pattern in many individual energy stocks, many of which pay beefy dividends.
In case you missed it I did this video update on gold a few days ago.
-Mike
