Less than a month ago, something that seemed impossible
actually occurred. The front month oil futures contract for May, which expired
in mid-April, actually traded negative. Traders were forced to sell at a loss
as those holding contracts on expiration have to take physical delivery, and
with no storage space available, had to sell at a loss.
What a difference a month can make for energy investors. On
Monday, the benchmark pricing for West Texas Intermediate crude shot up to
$33.10, up almost 14% from the Friday close. Oil traders seemed to be focused
down the road, with futures markets for both overseas-benchmark Brent and West
Texas Intermediate barrels for December delivery having the highest open
interest, or total number of options and outstanding contracts.
What that means for investors is that while the front month
contract for June, which expires this week, is the current price point, many
traders think the biggest money can be made later this year, as the combination
of production cuts and renewed consumption kicks in. For investors looking for
energy stocks to buy, the prices now are still very reasonable.
We screened the BofA Securities energy research universe
looking for companies with Buy ratings that have kept the dividend intact. We
stay with the larger cap leaders, as they have the ability and balance sheet to
stay in the game when prices become extremely volatile.
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