RE:RE:Dividend now at 5.4%Oil has declined from about $79 to $76 in the past week and the share price has dropped about 10-12% during that time. The decline to oil is mostly driven by concerns of lower demand from risks of higher interest rates and the link of how that could lead to a possible recession this year.
However actual oil fundamentals indicate that association is incorrect as oil demand appears to be increasing with higher forecasts for 2023 while production is softening. Excluding the demand crash shlt that was covid, oil demand is considered somewhat inelastic historically.
I think the large traders are having a field day trading oil stocks as they know the profits and dividens are sound which is supported by share buybacks, while they play the recession news to allow large swings in share prices to buy/sell. That has been shown to be the case in the past 6 months at least as oil always manages to move back to the $80 range on fundamentals. I've been in/out with about 50% of my stock more than several times now, and it has been profitable plus the dividends that I get if hold beyond the ex date
Traders are talking about $100 oil this year and they are well aware of recession implications but have also factored in cap ex considerations in to the s/d scenario. We all know most oil producers are conservative with cap expansion and will be more so with a higher interest rates and if a recession were to happen. That provides oil with essentially a floor price so that is why Nuttall and others are so bullish on oil and sgy.
While no one knows where this is going and oil can drop further, I have bought back in and expect that within a week or two oil trends back up on bullish news. There are risks, as with any investment but if oil doesn't rise in the short term I will hold and take the dividend and wait for the oil supply/demand fundamentals to direct prices again.