The energy sector experienced its fair share of challenges in 2023, but as we step into 2024, there are emerging investment opportunities that traders and retail investors should keep a close eye on. Bill Perkins, the CEO and head trader at Skylar Capital Management, has expressed a mild bullish sentiment towards oil and has identified potential avenues for retail investors to explore in the energy sector. In this article, we will delve into Bill Perkins’ insights and explore opportunities in both the oil and natural gas segments.
The Current State of the Oil Market
Bill Perkins highlights the sluggish demand for oil in Asia and the exceptional supply levels, especially among producers in the Permian basin, located in West Texas and New Mexico. This region has become a hotspot for oil production, contributing significantly to the oversupply in the market. While this oversupply has weighed on oil prices, it has also created intriguing opportunities for those looking to invest.
Oil prices have been characterized by volatility over the past few months. They surged in the aftermath of Houthi attacks in the Red Sea in November but settled in December as shipping disruptions eased. The new year has brought fresh momentum, with the U.S. warning Houthi militants against further attacks in the Red Sea and OPEC pledging to maintain unity in supporting prices. As a result, Brent crude oil prices were trading around $77.98 a barrel at the time of writing.
Headwinds in the Oil Market
Despite the positive indicators, Bill Perkins anticipates continued headwinds in the oil market. Two significant factors to consider are high-interest rates and the “ESG premium.” The prospect of continued high-interest rates can impact investment decisions and economic growth. Additionally, investors are increasingly placing emphasis on investments with environmental, social, and governance (ESG) characteristics. This shift in investor sentiment could influence the performance of energy companies, making it essential to consider ESG factors when evaluating investment opportunities.
Promising Investment Picks
Bill Perkins has identified several top picks that align with the potential opportunities in the energy sector. These picks are likely to resonate with retail investors seeking to capitalize on the evolving dynamics in the market:
1. Devon Energy
Devon Energy is one of the top choices, with a price target of $69, raised from $65. The company’s new and existing well productivity is expected to play a pivotal role in driving supply and demand dynamics, ultimately impacting commodity prices. While moderate commodity prices are projected for most of the year, late 2024 and 2025 are anticipated to witness price improvements as demand begins to outpace overall supply, affecting well productivity.
2. EOG Resources
EOG Resources is another promising option, with its price target raised to $172 from $169. Similar to Devon Energy, EOG Resources’ well productivity will continue to shape supply and demand dynamics in the energy sector. While moderate commodity prices are expected for most of 2024, late 2024 and 2025 may bring price improvements as demand starts to surpass overall supply. Investors should keep a close watch on this development.
3. Diamondback Energy
Diamondback Energy also stands out as a viable investment choice, with a price target of $240, up from $225. The company’s well productivity, both new and existing, will be a driving force behind supply and demand dynamics and commodity prices. As with the other two picks, 2024 is anticipated to witness moderate commodity prices, but late 2024 and 2025 could see improvements as demand takes precedence over supply.
Bottom-line: As we navigate through 2024, the energy sector presents compelling opportunities for traders and retail investors. While the oil market faces ongoing challenges, including high-interest rates and the influence of ESG factors, there is room for optimism. The resurgence of oil prices, coupled with the evolving dynamics in well productivity and supply-demand balance, creates a favorable environment for strategic investments.
Bill Perkins’ insights into the potential of the Permian basin and the selection of top picks, including Devon Energy, EOG Resources, and Diamondback Energy, offer valuable guidance for those looking to make informed investment decisions in the energy sector. As always, investors should conduct thorough research and consider their risk tolerance before making any investment choices.
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This content is provided for informational purposes only and does not constitute financial, investment, tax or legal advice or a recommendation to buy any security or other financial asset. The content is general in nature and does not reflect any individual’s unique personal circumstances. The above content might not be suitable for your particular circumstances. Before making any financial decisions, you should strongly consider seeking advice from your own financial or investment advisor.
