O&G: Riding the Crude Oil Recovery

It is becoming clearer that crude oil prices could have touched the bottom. This position was highlighted here in early January & again in February. The premise was purely technical, i.e. the crude oil prices would find support at the tentative uptrend line at USD50. (Note: WTIC made an intra-day low of USD43.58 in January).


Chart 1: WTIC's monthly chart as at Feb 16, 2015 (Source: Investorshub)

Assuming that crude oil will begin to recover from here, what can we expect for O&G stocks. Obviously, they will continue to rise- albeit at a less than spectacular rate as compared to the past 3-4 weeks.. We can see that in the way Coastal & Dialog's share prices rose from the low in 2009 (see Chart 2 below).


Chart 2: Coastal & Dialog's monthly chart as at Feb 17, 2015 (Source: ShareInvestor.com)

Would higher crude oil prices affect the share prices of aviation stocks? We can see from Chart 3 below that Airasia & Airport continued to rise from its low in 2009 despite higher crude oil prices.


Chart 3: Airasia & Airport's monthly chart as at Feb 17, 2015 (Source: ShareInvestor.com)

From the above, I think that we can slowly accumulate O&G stocks and hold onto aviation stocks in an environment of rising crude oil prices. However, the rise in crude oil prices will not be in a straight line. I expect volatility to rein given the excess supply but at the same times, geopolitical factors (like Ukraine & Middle East problem) may cause an uptick in prices.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, COASTAL, DIALOG, AIRASIA & AIRPORT.