Dealer makes the case for a spike in oil costs

Crude oil costs are on a path to highs not seen since 2014, in line with one chart analyst.

Because the vitality sector tracks for its finest quarter on report with a year-to-date acquire of almost 40%, there’s “clearly some upside” for oil costs as nicely, Piper Sandler’s Craig Johnson advised CNBC’s “Buying and selling Nation” on Friday.

U.S. West Texas Intermediate crude costs slid half of 1% to round $65.60 a barrel on Friday.

“I might truly see a quantity that might be north of 100 within the subsequent, say, six to … 12 months from right here,” mentioned Johnson, his agency’s senior technical analysis analyst.

The Power Choose Sector SPDR Fund (XLE) can be displaying indicators of life after a troublesome 2020, he mentioned.

“There’s clearly a double backside that has been made and even the next low that has been made,” he mentioned, citing a chart of the 23-stock exchange-traded fund.

“We’re getting a multi-year reversal by way of the efficiency of the XLE in comparison with the S&P 500. Clearly, there are some very optimistic traits occurring right here,” he mentioned. “These are longer-term themes and traits which are beginning to unfold.”

One smaller title might see outsized advantages from these traits, Johnson mentioned.

“Remember concerning the mid- and small-cap shares, too, as a result of they’re additionally collaborating within the motion,” he mentioned, pointing to a chart of exploration and manufacturing firm Cimarex Power.

“To us, it appears like you can have greater than 40% upside to get again to the outdated highs in 2018,” he mentioned.

Cimarex shares closed almost 2% decrease at $65.14 on Friday. A 40% run from these ranges would carry the inventory to round $91.20 a share.

With OPEC more likely to preserve manufacturing regular till at the least the summer time, Laffer Tengler Investments’ Nancy Tengler was additionally anticipating a surge in oil costs.

“We do not see any provide improve till October, which implies the worth of oil can run fairly handily from right here. Our expectations are someplace round $80 a barrel in the summertime, so, that is bullish for many of the oil shares,” she mentioned in the identical “Buying and selling Nation” interview.

Tengler’s agency owns Chevron, which she known as “finest in school within the built-in area,” Diamondback Power, Phillips 66 and some different shares within the area — and he or she plans to train warning going ahead.

“These shares have run dramatically,” she mentioned, highlighting Diamondback’s 69.5% run this yr. “When it is time — and we do not suppose it’s time — we expect you fade a few of these shares which are extremely leveraged to the worth of oil and also you maintain onto high quality within the second half of the yr, and that may be one thing like Chevron.”

JPMorgan named Chevron and Exxon Mobil its high picks among the many oil “majors” on Friday, citing higher price effectivity and saying stability sheet leverage might return to pre-pandemic ranges this yr.

Disclosure: Laffer Tengler Investments owns shares of Chevron, Diamondback Power and Phillips 66.

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