After suffering continuous decline since last month, most of the oil stocks including big names like Chevron Corporation CVX, Exxon Mobil Corporation XOM, ConocoPhillips COP and Phillips 66 PSX spiked up on Tuesday with most of them trading higher by 3 percent.
Fadel Gheit, Oppenheimer senior energy analyst, was on CNBC to discuss the reason behind this sudden spike and how to play oil stocks right now.
Bottom Fishing And Short Covering
"There is no change in fundamentals," Gheit began. "I do believe that oil prices are going to be lower for longer and that's what BP said this morning that oil prices will likely to stay at lower than most people had expected for longer time and that's exactly what we are saying."
"Most of the oil stocks that we cover are down and they were down significantly. As of yesterday, 50 percent of them closed at 52-week lows. So obviously this is like bargain hunting, bottom fishing, rebound action if you will and short covering."
Gheit continued, "But fundamentally supply is still ample and exceeds the demand. The demand picture is really weak. The Chinese situation obviously sends fear in the hearts of most people. So we don't see the change in fundamental that really reflect the jump in stock prices."
A Good Selling Opportunity
Gheit was asked whether he is suggesting clients to invest in oil stocks at this level. He replied, "I actually say to people who are willing to trade the fact, sell them on a spike. Buy them on dips and sell them on spike. Today is a good selling opportunity."
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