What is WTI crude oil and why does it matter?

WTI (West Texas Intermediate) crude oil is a specific grade of crude oil that serves as a benchmark for oil pricing in the United States. When people talk about oil prices in the US market, they're often referring to WTI prices. It matters because it directly affects the revenues and profits of oil companies - when WTI prices rise, companies that produce oil typically make more money on each barrel they extract.

What are upstream operations in oil companies?

Upstream operations refer to the exploration and production (E&P) activities in the oil industry - essentially finding oil reserves and extracting the crude oil from the ground. This segment of an oil company's business is most directly affected by oil price changes. When oil prices go up, upstream operations become more profitable because the company earns more money for each barrel of oil it produces.

What is OPEC+ and how does it affect oil prices?

OPEC+ is a group of oil-producing nations that includes the Organization of Petroleum Exporting Countries (OPEC) and additional countries like Russia. This group coordinates production decisions to influence global oil supply and prices. When OPEC+ reduces production, oil supply tightens and prices typically rise, benefiting the companies in this stock group. Their decisions are a key factor in global oil price movements.

What are "crack spreads" in the oil refining business?

Crack spreads are the difference between the price of crude oil and the price of refined petroleum products like gasoline and diesel. This spread represents the potential profit margin for oil refiners. When crack spreads are wide (meaning refined products are selling at a significant premium to crude oil), refining companies like VLO, PBF, and CVI can be more profitable, even during periods of high oil prices.

What makes oil stocks cyclical investments?

Oil stocks are considered cyclical because their performance tends to follow economic cycles. During economic expansion, demand for oil and fuel increases as industrial activity and consumer travel rise, boosting oil prices and energy company profits. During economic slowdowns, the opposite occurs. This makes oil stocks more sensitive to economic conditions than many other sectors, creating opportunities for tactical investments during upswings in the energy commodity cycle.

16 handpicked stocks

Oil's Ascent

WTI crude oil prices have climbed to their highest levels since April, creating promising opportunities in the energy sector. These carefully selected stocks are positioned to benefit directly from sustained higher oil prices, giving you access to potential growth in this important market.

Han Tan | Market Analyst

Updated 2 days ago | Published at juillet 1