Why Oil Investors Should Keep The OPEC Deal In Perspective

PreMarket Prep hosts Joel Elconin and Dennis Dick discussed the real impact that the OPEC production cut deal will have on oil stocks. According to Dick, WTI’s 9 percent jump to nearly $50 isn’t really cause for celebration for many of the higher-cost oil producers.

“A lot of these companies are still struggling here. If oil gets back to $70, $80, $90, a lot of these companies start making some serious money again, but they’re just holding on here in the $40s and $50s,” he explained.

Dick noted that investors should keep the OPEC deal in perspective. It’s certainly a step in the right direction, but oil prices still need to be much higher for many companies to have a chance of profitability and growth.

He mentioned Seadrill Ltd SDRL as one example of a stock that has made a huge move since the OPEC news came out. Dick cautioned investors looking to pile into the battered deepwater driller.

“You can say, 'okay Seadrill stock used to be $45, so I’m getting a great deal here at $2.68,' but we still don’t know if the operations are even viable at $50 oil,” he said.

Seadrill traders might consider taking profits on the massive 25.3 percent gain the stock has made in the past two days.

Listen to the full discussion in the clip below.

PreMarket Prep is a daily trading ideas show that focuses on technical analysis and actionable short term trades. You can listen to the show live every morning from 8-9 a.m. ET here, or catch the podcast here.