{"id":38440,"date":"2023-07-20T22:14:36","date_gmt":"2023-07-21T02:14:36","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/oil-stocks-have-bounced-dont-chase-the-rebound\/"},"modified":"2023-07-20T22:14:38","modified_gmt":"2023-07-21T02:14:38","slug":"oil-stocks-have-bounced-dont-chase-the-rebound","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=38440","title":{"rendered":"Oil Stocks Have Bounced. Don’t Chase the Rebound."},"content":{"rendered":"
\n

Energy stocks have popped in the past week or so. If you\u2019re tempted to play, just go in with your eyes wide open. <\/p>\n

The draw is easy to understand. After all, the
\n Energy Select Sector SPDR Fund
\n (XLE), which counts
\n Chevron
\n (CVX) and
\n Exxon Mobil
\n (XOM) as top holdings, more than tripled from its Covid-era bottom to its peak last year\u2014from $25 to $93. A dip in the global oil supply, triggered by sanctions on Russia because of the Ukraine war, helped drive the gains. <\/p>\n

\n

And the fund has been able to hold its price in the high-$60s-to-low-$70s range for roughly the past year. A big reason is that buyers know the Federal Reserve is slowly bringing down inflation, which more than likely means the end\u2014or at least a true pause\u2014in rate hikes is in the offing. <\/p>\n

A sound economy, as the axiom goes, supports oil prices. Even optimism about what\u2019s ahead translates to increases. West Texas Intermediate, the benchmark for the U.S. market, is up to $76 a barrel from near $67.50 in late June. That 12% jump has sent the fund up about 5%, from $79 to around $83. <\/p>\n

But don\u2019t expect the gains to keep gushing. The futures market expects a price drop by 2025\u2014to the mid-$60s\u2014because of the lasting effect that the Fed\u2019s higher rates will have on economic demand. <\/p>\n

That downward projection is weighing on the stocks. Investors simply don\u2019t want to bid up the stock prices to levels that reflect a long-term high price for crude. Ordinarily, the stock prices rise faster than the price of crude because higher prices boost oil sales, which translates to profits rising faster because of producers\u2019 fixed costs. <\/p>\n

The stocks have now traded with enough weakness that their technical trends look fairly troubling. <\/p>\n

The fund is a bit below its 200-day moving average of $84.50\u2014and has been since early May, according to FactSet. Put another way, stock prices aren\u2019t keeping pace with their longer-run averages, suggesting that investors are losing confidence. <\/p>\n

To be sure, the lower prices present a buying opportunity for anyone who is upbeat about the price of oil. But the dip for the stocks also means the expectation about cheaper crude must change.<\/p>\n

And if the cloud over oil prices doesn\u2019t lift, then the stocks have only begun to break down.\u00a0A dose of healthy skepticism makes even more sense. \u00a0<\/p>\n

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Energy stocks have popped in the past week or so. If you\u2019re tempted to play, just go in with your eyes wide open. The draw is easy to understand. After all, the Energy Select Sector SPDR Fund (XLE), which counts Chevron (CVX) and Exxon Mobil (XOM) as top holdings, more than tripled from its Covid-era […]<\/p>\n","protected":false},"author":1,"featured_media":38441,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-38440","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nOil Stocks Have Bounced. Don't Chase the Rebound. | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Energy stocks have popped in the past week or so. If you\u2019re tempted to play, just go in with your eyes wide open. The draw is easy to understand. 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