Crude oil costs are on a path to highs not seen since 2014, in keeping with one chart analyst.
Because the vitality sector tracks for its finest quarter on file with a year-to-date achieve of almost 40%, there’s “clearly some upside” for oil costs as effectively, 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 may 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 Vitality Choose Sector SPDR Fund (XLE) can also be displaying indicators of life after a troublesome 2020, he mentioned.
“There’s clearly a double backside that has been made and even a better 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 can be beginning to unfold.”
One smaller title may see outsized advantages from these traits, Johnson mentioned.
“Remember in regards to the mid- and small-cap shares, too, as a result of they’re additionally taking part within the motion,” he mentioned, pointing to a chart of exploration and manufacturing firm Cimarex Vitality.
“To us, it seems like you might have greater than 40% upside to get again to the previous 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 a minimum of 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 suggests 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 at school within the built-in house,” Diamondback Vitality, Phillips 66 and some different shares within the house — and he or she plans to train warning going ahead.
“These shares have run dramatically,” she mentioned, highlighting Diamondback’s 69.5% run this 12 months. “When it is time — and we do not assume it’s time — we predict you fade a few of these shares which can be extremely leveraged to the worth of oil and also you maintain onto high quality within the second half of the 12 months, and that might be one thing like Chevron.”
JPMorgan named Chevron and Exxon Mobil its prime picks among the many oil “majors” on Friday, citing better price effectivity and saying steadiness sheet leverage may return to pre-pandemic ranges this 12 months.
Disclosure: Laffer Tengler Investments owns shares of Chevron, Diamondback Vitality and Phillips 66.