Oil prices rose for a six straight month. Here're some potential tips on how to invest in the crude oil market.

Moo Options Explorer joined discussion · May 27, 2022 03:57

Hotspots

Oil, bolstered by a broad-based market rally, rose for a second day as US crude and gasoline stockpiles showed signs of continuing decline ahead of the summer driving season.

$Crude Oil Futures(JUN4)(CLmain.US)$

Crude oil prices still remain high at present, with $Brent Last Day Financial Futures(JUL4)(BZmain.US)$ above $110 a barrel for quite some time.“The realization is setting in that supplies are going to continue to contract,” said Dennis Kissler, senior vice president of trading at BOK Financial. “That's what's pushing crude higher.”

According to the SEC filings of Berkshire Hathaway, the company boosted its stake in the energy giant $Chevron(CVX.US)$ in Q1 and significantly increased its position in $Occidental Petroleum(OXY.US)$ by 5.9 million shares in May, marking a bigger bet on oil stocks. Fueled by Warren Buffett's continuous purchases and the Russia-Ukraine conflict, Occidental became the best performing constituent stock in the S&P 500 in Q1.

$Occidental Petroleum(OXY.US)$ —— We bought all we could.” Buffett said.

$Chevron(CVX.US)$ —— Berkshire's investments in Chevron reached $25.9 billion as of Q1

*Source: Bloomberg & moomoo news

Tips

Below are some potential investment tips for you in the current market environment：

If you remain bullish on oil despite the sanctions against Russian oil:

1. Keep tabs on Oil & Gas Integrated

You can check out the detailed quotes of various oil and gas stocks via Oil & Gas Integrated (code: BK2224) on moomoo. Over 80% of the stocks in the oil and gas sector were up more than 10% year-to-date:

$Exxon Mobil(XOM.US)$ : one of the world's largest oil companies and was up more than 51% year-to-date

$Chevron(CVX.US)$ : Berkshire's long-term equity holding

$Shell PLC(SHEL.US)$ : a British publicly traded multinational oil and gas company

$Petroleo Brasileiro SA Petrobras(PBR.US)$ : leading player in Brazil's oil industry

*The above are the top 4 stocks by turnover in the oil and gas sector as of May 27, 2022

2. Turn to oil and gas ETFs

In addition to $Oil & Gas Integrated(BK2224.US)$, U.S. oil and gas ETFs including $United States Oil Fund LP(USO.US)$ (1Y %Chg: 32%), $VanEck Oil Services ETF(OIH.US)$ (1Y %Chg: 57%), and $SPDR S&P Oil & Gas Exploration & Production ETF(XOP.US)$ (1Y %Chg: 24%) have also witness a surge given the rising oil prices.

*The above are the top 3 crude oil ETFs by turnover as of market close on May 27, 2022

If you think oil is overvalued already and are not confident about a further increase in oil prices:

Oil futures may come in handy. With less than $2,000, you can open a position in Micro WTI Crude Oil futures.

Futures adopt a more flexible T+0 settlement cycle, which helps to quickly adapt to the changing market conditions and to reduce the risks brought by a potential drawdown from peak to trough. The WTI light crude oil futures contracts feature high liquidity and thus can potentially serve as an efficient trading options.

No matter whether you are bullish or bearish on the crude oil market, you may consider using options as a hedging tool:

Options can work as a hedge against the underlying stocks you hold and help to potentially secure your returns in the current market environment.

Oil and gas-related in-the-money options showing high volatility:

$Exxon Mobil(XOM.US)$ XOM 220603 96.00C -4.48%
$Chevron(CVX.US)$ CVX 220603 175.00C +8.11%
$Shell PLC(SHEL.US)$ 220617 60.00C -8.64%

* The above are the call options underlying the top 3 stocks in Oil & Gas Integrated by turnover on May 27, and their strike prices are nearest to the underlying stocks' closing prices on May 27.

$S&P 500 Index(.SPX.US)$
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Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only. Read more

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