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Is It Time To Buy Back Some Oil Stocks?

A month or so ago, on October 15th, I wrote in these pages that I was taking some profit and selling some oil stocks. Crude futures are around ten percent lower today than when I wrote that, so you might think that that was a good decision. The Energy Sector ETF, XLE, however, is only around two percent lower, so it wasn’t quite as smart as it looks on the surface. Still, over the next few trading days, I will be reversing that and buying some of them back in anticipation of a bounce in crude.

That may seem like a strange thing to say given the rumors that have been swirling around of the Biden administration releasing oil reserves to combat high prices and even of requesting a coordinated release by other countries, but that looks pretty much priced in at current levels, and the impact, should it happen, will be short-term in nature.

Biden and other Western leaders are feeling enormous political pressure to “do something” about rising energy prices and releasing reserves is the obvious thing for them to do. It will reduce the political backlash somewhat, but we should remember that for many in Biden’s party, relatively low oil supply and the resulting high oil and gas prices are features of his energy policy, not bugs. If there is to be a hastened transition away from fossil fuels it will be aided by high oil prices, so deliberately keeping them low for any extended time is not an option for him politically.

Then there is the news…





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