West Texas Intermediate was under pressure on Friday for the second day in a row, falling below $69 a barrel, though it remained on pace for a nearly 1% gain for the week. These moves in Oil come as the U.S. encouraged OPEC and its allies to increase their output to lower prices and fuel an economic recovery.
The International Energy Agency also lowered its forecast for demand in Oil for the rest of the year as Covid cases spike again. In an interview with Trading Nation, Tocqueville Asset Management portfolio manager John Petrides gave his outlook on the energy market.
He said that the energy sector was brought through the wringer last year when the price of Oil collapsed from around $50 to $15, and then it rebounded up to the north of $70 sort of 12 months later. The space is very volatile; OPEC is a complete wild card, and you have the pressure from the ESG and reducing carbon footprint.Despite these concerns, Petrides said energy is under-owned, as it makes up only approximately 3% of the S&P 500. He suggests that the sector is valuable, pointing to its past earnings season.
He said that they heard from all of the energy players that they’re cutting capital expenditures. These companies also announced plans to redeploy their capital to cutting debt, repairing balance sheets and buying back stock.Petrides points out that in the current low-yield environment, these companies have increased their dividend, making their stocks more attractive to investors. He likes Chevron, calling the company a beacon of safety within a volatile Oil market.