How You Can Benefit From The Rise In Oil Prices
A crude oil barrel currently sells for nearly $105 and gas is nearly $4 a gallon in most regions of the country. Investors may be looking for a way to get long the oil market. I suggested that investors buy Exxon last July at $60 per share because the stock was way too cheap. Now that Exxon is up to $85 a share; it is no longer the value play it once was. If you think that oil prices will keep rising, here are a few ways to benefit from a continued rise in oil prices.
Total is an my favorite major integrated oil company right now. Shares currently trade at just $60 a share. The stock is a great dividend play with a 4.3% yield. The stock trades at just 8.5 times earnings and analysts have very low earnings projections on the stock. They are only expecting 3% annual growth which I believe Total can easily beat. Total is investing heavily in diversified oil operations devoting $2 billion dollars of its $20 billion dollar budget in exploration alone.
United States Oil ETF (USO)
USO gives investors a chance to benefit directly from escalating oil prices. USO tracks the spot price of West Texas Sweet Crude Oil. The ETF aims to replicate the price as closely as possible but is subject to some deviation. This is a very efficient oil ETF with lower than average expenses and absolutely no portfolio turnover. It’s an effective oil trading vehicle.
Oil Services Holders ETF (OIH)
A continued rise in oil prices is a benefit for the oil services companies as well. Schlumberger, Halliburton, Baker Hughes, Transocean, and National Oilwell Varco. Buying the OIH exchange traded fund will give investors access to all of the major oil service providers. Higher oil prices means that energy companies will use the services and technologies of these companies for exploration, production, and refining of oil. Oil companies will rent more rigs, drills, and other oil services equipment as along as crude oil prices remain high. This equates to premium rental rates for these oil service companies.
iPath S&P GSCI Crude Oil TR Index ETN (OIL)
This ETN is linked to the performance of the Goldman Sachs Crude Oil Return Index. It is an unlevered ETN. OIL reflects the returns that are potentially available through an investment in the futures contacts comprising the index plus the Treasury Bill rate of interest that could be earned on funds committed to the trading of the underlying contracts. ETN’s are relatively new investments having only been available for five years.