How we think about our oil stocks in light of Monday's wild swing in crude prices

Published Mon, Nov 21 20223:33 PM EST

Kevin Stankiewicz @in/kevinstankiewicz @kevin_stank

A volatile session for crude Monday demonstrates why we continue to stick by our energy holdings and view near-term price dips as chances to bolster our exposure. What's happening Crude futures came off their lows of the session Monday after Saudi Arabia denied a Wall Street Journal story that suggested an oil-production increase of 500,000 barrels per day was on the table at OPEC's December meeting. Both the U.S. and international oil benchmarks initially fell more than 5% in the wake of that report. West Texas Intermediate crude recovered much of the losses following the Saudi denial , trading down less than 1% at nearly $80 per barrel around 2:40 p.m. ET. Brent crude was down about 0.4%, at just over $87 per barrel. The steep slide earlier appeared to reflect traders' surprise that more supply could be coming onto the market — remember, less than two months ago the Organization of Petroleum Exporting Countries and a cohort of partner producers led by Russia, known collectively as OPEC+, slashed oil output targets by 2 million barrels per day . The October production cut was seen, at the time, as an attempt to shore up tumbling oil prices, and generally speaking it worked for a little while. However, since the first week of November, crude prices had been trending lower. That's not exactly the backdrop that would get market participants to expect output increases , which could explain the magnitude of crude's initial tumble. At its Monday bottom, WTI reached its lowest level since early January. The various OPEC+ headlines are the primary driver of the crude's move Monday. Still, it's worth noting that Beijing's decision to implement tighter Covid restrictions in the city are not helping matters, either. China's strict Covid policy has weighed on the world's second-largest economy and, therefore, been a drag on oil demand. China is the world's largest oil importer, so its actions have a big impact on the market. The Club take Our energy stocks have struggled in November alongside the decline in oil. All four of the energy stocks in our portfolio — Devon Energy (DVN), Coterra Energy (CTRA), Pioneer Natural Resources (PXD) and Halliburton (HAL) — are down month to date compared with a roughly 2% gain for the S & P 500 . We see the weakness as an opportunity to strategically add to our sector exposure, evidenced by our decision Friday to scoop up 100 additional shares of high-yielding Coterra . Our outlook is predicated on two developments that would boost oil prices. The first is the White House&#