With crude prices rising but the energy sector down, we're buying this oil stock into weakness

Published Wed, Nov 30 20221:14 PM ESTUpdated Fri, Dec 2 202210:43 AM EST

We're buying 25 shares of Pioneer Natural Resources (PXD), at roughly $233.66 a share. Following Wednesday's trade, Jim Cramer's Charitable Trust will own 150 shares of PXD, increasing its weighting in the portfolio to 1.23% from 1.03%. The price of a barrel of West Texas Intermediate (WTI) crude oil jumped Wednesday by more than $2 , to $80, on the back of tight supply and optimism around the reopening of China's economy. Conversely, energy sector stocks as a group traded lower Wednesday. WTI has risen more than 8% since Monday, when we added to our position in Devon Energy (DVN) — an early confirmation of our view that oil prices could find some support here. In addition to technical factors, we see three reasons why upside risks to oil outweigh the downside potential. Firstly, the Biden administration is winding down the release of barrels of oil from the Strategic Petroleum Reserve . Secondly, there is continued optimism around China easing its Covid-19 restrictions to spur economic growth. And, lastly, there is the possibility of another production cut from the Organization of the Petroleum Exporting Countries and its oil producing allies next week, which could kick off another run-up in prices. In that context, we view today's underperformance in energy stocks, relative to the movement in the commodity, as an opportunity to pick up more shares of Pioneer Natural Resources into weakness. We like Pioneer because it has some of the best oil assets in the Permian Basin, with high realized pricing and low cash costs. Management's disciplined approach to drilling, along with its focus on maximizing cash flow generation, has led to a peer-leading cash return framework. Pioneer returned 108% of its third-quarter free cash flow to shareholders through dividends and buybacks — and we appreciate these consistent returns during this period of economic and geopolitical uncertainty. (Jim Cramer's Charitable Trust is long PXD, SPR . See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

A drilling rig operates in the Permian Basin oil and natural gas production area in Lea County, New Mexico, February 10, 2019.

Nick Oxford | Reuters