{"id":59715,"date":"2024-10-08T06:00:25","date_gmt":"2024-10-08T10:00:25","guid":{"rendered":"https:\/\/www.ino.com\/blog\/?p=59715"},"modified":"2024-10-10T15:41:43","modified_gmt":"2024-10-10T19:41:43","slug":"is-it-time-to-buy-the-dip-in-oil-majors-or-stay-cautious","status":"publish","type":"post","link":"https:\/\/wwwtest.ino.com\/blog\/2024\/10\/is-it-time-to-buy-the-dip-in-oil-majors-or-stay-cautious\/","title":{"rendered":"Is It Time to Buy the Dip in Oil Majors or Stay Cautious?"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Oil prices have been on a<\/span><a href=\"https:\/\/www.msn.com\/en-us\/money\/markets\/middle-east-conflict-risks-huge-oil-prices-threat-to-us-economy\/ar-AA1rKtBH?ocid=finance-verthp-feeds\"> <span style=\"font-weight: 400;\">wild ride<\/span><\/a><span style=\"font-weight: 400;\"> recently, dropping from $92 a barrel last year to around $70. Speculations have emerged that Saudi Arabia might aim to push prices down to $50 amid internal disagreements within OPEC+. However, rising tensions in the Middle East are shifting the narrative once again, with fears that a regional war could send crude prices soaring.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Just last week, U.S. crude oil<\/span><a href=\"https:\/\/www.cnbc.com\/2024\/10\/07\/crude-oil-price-today.html\"> <span style=\"font-weight: 400;\">surged over 3%<\/span><\/a><span style=\"font-weight: 400;\"> as the market braced for potential Israeli strikes on Iran in retaliation for missile attacks. This anxiety led to a significant rally, with the U.S. benchmark West Texas Intermediate (WTI) climbing 9.09% (the largest weekly gain since March 2023), while Brent crude experienced an impressive rise of 8.43% (marking its biggest advance since January 2023). It\u2019s clear that large swings in oil prices have profound effects on the U.S. economy, making investors increasingly cautious yet opportunistic.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Adding to the complexity, Saudi Arabia recently announced plans to ramp up its oil production starting in December, stepping away from its previous target of maintaining $100-per-barrel prices. This move, coupled with the resolution of a political dispute in Libya that could see an increase of 500,000 barrels per day in supply, temporarily<\/span><a href=\"https:\/\/www.msn.com\/en-us\/money\/markets\/oil-prices-dip-again-as-fears-of-market-oversupply-loom\/ar-AA1rmYWE?ocid=msedgntp&amp;pc=DCTS&amp;cvid=e266d96be6a147cf9dae58588e957fc4&amp;ei=44\"> <span style=\"font-weight: 400;\">lowered global oil prices<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Yet, the situation remains precarious, particularly with Iran\u2019s involvement and the potential for further conflict. If the situation escalates, particularly if Israel targets Iran\u2019s oil facilities, it could put as much as 4% of global supply at risk, which could send prices skyrocketing.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Despite the recent volatility, retail investors are increasingly diving into oil-linked products. While the market has been somewhat subdued in its reaction to the unfolding crisis, experts caution that complacency could be dangerous. Goldman Sachs suggests that a significant fall in Iranian output could boost oil prices<\/span><a href=\"https:\/\/www.cnbc.com\/2024\/10\/04\/goldman-sachs-says-crude-could-spike-by-20-on-iran-oil-shock.html\"> <span style=\"font-weight: 400;\">by $20 per barrel<\/span><\/a><span style=\"font-weight: 400;\">, while others, like Swedish bank SEB, even warn that, in a worst-case scenario, prices could<\/span><a href=\"https:\/\/www.cnbc.com\/video\/2024\/10\/03\/oil-may-hit-200-if-irans-energy-infrastructure-is-targeted-analyst.html\"> <span style=\"font-weight: 400;\">climb to over $200<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As we navigate this uncertain landscape, marked by fluctuating crude prices between $66 and $96 per barrel and weak demand from China alongside lackluster global economic data, the outlook for oil remains murky. However, the recent escalation in the Middle East has renewed fears of potential supply disruptions, especially if military conflicts escalate further. This leaves investors questioning: Is now the right time to buy the dip, or is it wiser to exercise caution?<\/span><\/p>\n<p><b><i>Stock to Buy:<\/i><\/b><b> Chevron Corporation (CVX)<\/b><\/p>\n<p><a href=\"https:\/\/quotes.ino.com\/charting\/?s=NYSE_CVX\"><span style=\"font-weight: 400;\">Chevron Corporation (CVX)<\/span><\/a><span style=\"font-weight: 400;\"> has long been a pure-play U.S.-based energy giant. However, the landscape of energy is shifting, and CVX is proactively adapting to the future of energy. The company understands that oil and gas won't be the only energy sources in the future, so it is moving into clean energy as part of its long-term strategy. It plans to<\/span><a href=\"https:\/\/www.chevron.com\/what-we-do\/energy\/new-energies\"> <span style=\"font-weight: 400;\">invest $10 billion<\/span><\/a><span style=\"font-weight: 400;\"> in lower-carbon projects by 2028.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The company is working on carbon capture projects, which help reduce harmful emissions, and, in this capacity, it operates one of the world\u2019s largest integrated CCS projects, Gorgon. Additionally, Chevron is developing the Bayou Bend carbon capture hub and exploring renewable energy options like hydrogen and geothermal energy through projects like the Advanced Clean Energy Storage Delta in Utah, set to begin operations next year.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Moreover, its recent acquisition of Hess for $53 billion strengthens its portfolio, even amid regulatory challenges. Analysts suggest that Chevron's strategy of balancing traditional oil and gas with new growth areas, particularly in the Permian Basin, will enhance its profitability. The company aims to increase its production to nearly 4.0 million barrels of oil equivalent per day by 2027, driven by investments in the Permian Basin, Kazakhstan, the Gulf of Mexico, and new opportunities in Mexico and Brazil.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In the<\/span><a href=\"https:\/\/www.chevron.com\/-\/media\/chevron\/stories\/documents\/2Q24-earnings-press-release.pdf\"> <span style=\"font-weight: 400;\">second quarter<\/span><\/a><span style=\"font-weight: 400;\"> ended June 30, 2024, CVX\u2019s total revenues and other income increased 4.7% year-over-year to $51.18 billion. The company\u2019s attributable net income came in at $4.43 billion or $2.43 per share, down from $6.01 billion, or $3.08 per share, for the same quarter last year. Even though profits have dipped, Chevron still has $9 billion in cash and a low debt-to-equity ratio of 10.7%. During the quarter, the company returned $6 billion to shareholders, including $3 billion in dividends and $3 billion in share buybacks (marking the ninth consecutive quarter of over $5 billion returned to investors).<\/span><\/p>\n<p><span style=\"font-weight: 400;\">On September 10, demonstrating its commitment to returning value to shareholders, the company paid a quarterly dividend of $1.63 per share. CVX pays an annual dividend of $6.52, which translates to a yield of 4.33% at the current share price. It has a payout ratio of 52.4%. For the fiscal year 2025, its revenues are expected to increase marginally year-over-year to $198.58 billion, while its EPS estimate of $12.44 indicates a 14.1% growth from the prior year period. Moreover, the stock has gained over 6% in the past month. Considering these factors, it could be wise for investors to scoop up the shares of this stock.<\/span><\/p>\n<p><b><i>Stock to Hold:<\/i><\/b><b> Exxon Mobil Corporation (XOM)<\/b><\/p>\n<p><a href=\"https:\/\/quotes.ino.com\/charting\/?s=NYSE_XOM\"><span style=\"font-weight: 400;\">Exxon Mobil Corporation (XOM)<\/span><\/a><span style=\"font-weight: 400;\"> explores and produces crude oil and natural gas. It also manufactures, trades, transports, and sells crude oil, natural gas, petroleum products, petrochemicals, and specialty products. It operates through three segments: Upstream; Downstream; and Chemical.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In May, ExxonMobil bolstered its position in the Permian Basin by acquiring Pioneer Natural Resources Company, enhancing its upstream portfolio with a combined 1.4 million net acres and an estimated 16 billion barrels of oil equivalent resources. The company anticipates that production from the Permian will more than double to 1.3 million barrels of oil equivalent per day in 2023, aiming for 2 million barrels per day by 2027. Additionally, ExxonMobil has a strong project pipeline in offshore Guyana, where low production costs will allow it to generate substantial returns.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">XOM\u2019s total revenues and other income for the second quarter ended June 30, 2024, increased 12.2% year-over-year to $93.06 billion. Its net income rose 17.3% from the year-ago value to $9.24 billion, while its earnings per common share came in at $2.14, representing a 10.3% year-over-year growth.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Analysts expect XOM\u2019s EPS for the fiscal third quarter (ended September 2024) to come in at $1.98, representing a 12.7% year-over-year decline. Likewise, the company\u2019s revenue is expected to decrease marginally from the year-ago value to $90.72 billion. Over the past year, the stock has returned over 25%, which is impressive. However, we think that XOM could be watched for now and waited for an opportunity to enter and tap into its long-term growth prospects.<\/span><\/p>\n<!-- AddThis Advanced Settings generic via filter on the_content --><!-- AddThis Share Buttons generic via filter on the_content -->","protected":false},"excerpt":{"rendered":"<p>Oil prices have been on a wild ride recently, dropping from $92 a barrel last year to around $70. Speculations have emerged that Saudi Arabia might aim to push prices down to $50 amid internal disagreements within OPEC+. However, rising tensions in the Middle East are shifting the narrative once again, with fears that a [&hellip;]<!-- AddThis Advanced Settings generic via filter on get_the_excerpt --><!-- AddThis Share Buttons generic via filter on get_the_excerpt --><\/p>\n","protected":false},"author":41,"featured_media":57847,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[34828,32943,32452,34826,34827,34829,34123,34830,34831],"class_list":["post-59715","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-by-20-per-barrel","tag-chevron-corporation-cvx","tag-exxon-mobil-corporation-xom","tag-invest-10-billion","tag-limb-to-over-200","tag-lowered-global-oil-prices","tag-second-quarter","tag-surged-over-3","tag-wild-ride"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v23.4 (Yoast SEO v23.6) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Is It Time to Buy the Dip in Oil Majors or Stay Cautious? - INO.com Trader&#039;s Blog<\/title>\n<meta name=\"description\" content=\"With the oil market grappling with geopolitical tensions and price fluctuations, investors are contemplating their next move. 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