Can Oil Stocks Benefit from Rising Oil Prices?

Moomoo Learn wrote a column · Oct 17, 2023 10:37

The oil sector is known for experiencing significant market fluctuations as it is closely tied to commodities. In the latter half of 2023, production cuts by Saudi Arabia and Russia caused oil stock prices to soar, renewing investors' interest in this industry. The ongoing military and political Israeli–Palestinian conflict further fuels oil prices.

Check the oil industry chain first

The oil supply chain can be divided into three categories:

Upstream: This includes exploration, drilling, and oil extraction, making it the most vulnerable part of the industry chain to oil price fluctuations. ConocoPhillips (NYSE: COP) is the largest exploration and production company in the US, while Occidental Petroleum (NYSE: OXY), which Warren Buffett buys on dips, also belongs to the upstream segment of the supply chain.

Midstream: This segment deals with the transportation, processing, and storage of crude oil and other refined petroleum products. Midstream companies typically conduct business using fixed-rate, long-term contracts, making their profitability less affected by oil price fluctuations. Enterprise Products Partners (NYSE: EPD) is a major midstream company.

Downstream: This segment involves refining crude oil into fuel or selling refined products to consumers. Gas stations and refineries are two types of downstream companies. They profit from the difference between oil prices and refined product prices. When oil prices fall, there is often a decline in demand for refined products that hits downstream companies hard. Phillips 66 (NYSE: PSX) is a major downstream company.

Moreover, the oil industry has an integrated sector that involves publicly traded companies operating at different stages of the oil supply chain. ExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX) are two well-known "Oil & Gas Integrated" giants of this sector.

Can Oil Stocks Benefit from Rising Oil Prices?

How do crude oil prices react to geopolitical and economic events? Why analyzing crude oil is important? What factors impact crude oil prices? Read our course and gain more insights>> The Underlying Conflicts Surrounding Crude Oil Prices

$Exxon Mobil (XOM.US)$ $Chevron (CVX.US)$ $Phillips 66 (PSX.US)$ $Enterprise Products (EPD.US)$ $ConocoPhillips (COP.US)$ $Occidental Petroleum (OXY.US)$

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71343945 : Thanks for that explanation. As my oil stocks jump up and down, now I have a better understanding as to why it's happening. My question would be, which is the most stable versus the most profitable?

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FuckTheNewWorldOrder : Thank you for the education. I don't read enough about the interworking of the stock market but I am now!
I appreciate your time and effort in doing this for myself and others.
Thank you

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Moomoo Learn OP FuckTheNewWorldOrder : Well done！Thanks for your likes. Hope you enjoy your learning journey here.

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Moomoo Learn OP 71343945 : It's important to understand the industry chain, which may help bring greater success.

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D Blaine : Please do more industry specific articles like this. They’re excellent!

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omar stanford : Thank you everyone for the information that's uploaded on Moomoo.. it's making everything easier to learn and understand as well..

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