Since the recent collapse of oil prices, explained in NinthandSuperior’s Buying the Dip article, the sector has been on a pretty predictable and profitable annual cycle for about 4 years. Starting in 2014, Nymex Crude prices dip in the winter and rise in the summer. Moving drastically in both ways, for a commodity at least.
Although there are variations in the pattern, often caused by output cuts or increases by OPEC or individual players, the annual buying opportunity has been consistent. And 2019 is par for the course! Nymex crude was priced at $75 in September 2018, then gradually fell to around $43 by December 2018. That low winter point has now increased to about $64 today. I bet it gets to $70 by July.
Like years past, that price of oil is reflected and amplified in small and mid cap US and Canadian oil company stocks. These stock prices often double or triple as oil goes from $40 to $75. This is because prices around $40 per barrel result in red quarterly numbers for most US companies while $55 per barrel quarters are green, as explained in our previously mentioned article. Here are a couple of examples:
Coincidentally, both Denbury Resources, DNR, and Baytex Energy, BTE, have gained about 43% since February. That’s 43% in just 2 months. If you’re reading this before June, you probably haven’t missed out on too much either. It isn’t too late you reader you. We explained in this NinthandSuperior article from last year that DNR gained at least 124% from February 2018 to June 2018. Then it tripled by September.
