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Higher Oil Prices Breathe Life Into This Sector

Higher Oil Prices Breathe Life Into This Sector

The price of oil just hit its highest point since July 2015. That’s really helping the one sector of the oil patch that we should be watching now: oil services companies.

The VanEck Vectors Oil Services ETF (NYSE: OIH) holds a group of oil service stocks in a basket. Its shares hit bottom at $21.76 per share in mid-August. As you can see from the chart below, its shares are steadily climbing in value:

The price of oil just hit its highest point since July 2015. That’s really helping the oil services stocks that we should be watching now. Here's why.

As the price of oil rises, so will the volume of drilling and production. That will breathe life into a sector that the market left for dead.

The low that the sector hit in August was the third-lowest value the fund hit since 2004. The lowest value came during the financial crisis, when shares of OIH fell near $19 per share in December 2008.

As you can see, the recent low was within $3 of that period. That is critical because in December 2008, fear paralyzed investors. No one wanted to buy stocks. Everyone sold in a panic. Seeing OIH shares come within 15% of that low price earlier this year was astounding.

It told me that investors didn’t believe oil prices would recover any time soon …  and that’s when I started telling you to get ready to buy.

We’ve discussed the oil service companies several times in these articles. We told you to put them on your watch list here. Then we bought them here. Then we talked about the 19% gain we made in just two months.

You see, nothing makes me happier than seeing investors quit. When things get so bad that they can’t get any worse … they must get better.

That’s what’s happening in the oil patch right now. Things are getting better. So, put some money to work there soon if you haven’t already.

Good investing,

Matt Badiali

Editor, Real Wealth Strategist

 

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