Crude oil prices are on track to highs not seen since 2014, according to a chart analyst.
While the energy sector hit its best quarter on record with gains close to 40% year-to-date, there is also “clearly an upward” for oil prices, Craig Johnson of Piper Sandler told The Washington City Times’s “Trading Nation” on Friday.
US West Texas Intermediate crude oil prices fell half 1% on Friday to about $ 65.60 a barrel.
“I could actually see a number that could be north of 100 in the next six to … 12 months from here,” said Johnson, his company’s senior technical research analyst.
The Energy Select Sector SPDR Fund (XLE) is also showing signs of life after a difficult 2020, he said.
“Clearly a double bottom has been reached and an even higher low,” he said, citing a chart from the 23-Stock Exchange Traded Fund.
“We’re getting a multi-year reversal in terms of the XLE’s performance compared to the S&P 500. It’s clear there are some very positive trends going on here,” he said. “These are longer-term themes and trends that are starting to unfold.”
A smaller name could see outrageous benefits from those trends, Johnson said.
“Don’t forget the mid- and small-cap stocks, as they are also in the action,” he said, pointing to a map from exploration and production company Cimarex Energy.
“To us it looks like you could have more than 40% upside potential to get back to the old highs in 2018,” he said.
Cimarex shares closed nearly 2% lower at $ 65.14 on Friday. A 40% increase from those levels would bring the stock to about $ 91.20 per share.
With OPEC likely to keep production stable until at least the summer, Nancy Tengler of Laffer Tengler Investments also expected oil prices to rise.
“We don’t see an increase in supply until October, which means that oil prices can turn fairly favorably from here. Our expectations are somewhere around $ 80 a barrel in the summer, so that’s optimistic for most oil supplies,” she says . said in the same “Trading Nation” interview.
Tengler’s company owns Chevron, which she called “best in class in the integrated space,” Diamondback Energy, Phillips 66, and a few other stocks in the space – and she plans to exercise caution going forward.
“Those stocks are up dramatically,” she said, highlighting Diamondback’s 69.5% run this year. “When it’s time – and we don’t think it’s time – we think you’re fading some of those stocks that rely heavily on oil price and holding the quality in the second half of the year, and that would be something its like Chevron. “
JPMorgan named Chevron and Exxon Mobil the best choice among oil “majors” Friday, citing greater cost-effectiveness and saying balance sheet leverage could return to pre-pandemic levels this year.
Disclosure: Laffer Tengler Investments owns shares of Chevron, Diamondback Energy and Phillips 66.