Are oil majors an opportunity for long-term stable returns?

The oil majors are currently experiencing some difficulties on the stock market with prices which have fallen sharply since the soaring oil price up to $65.65 per barrel for WTI and up to $71.31 per barrel for Brent following the death of Iranian general Qassem Soleimani on January 3, 2020.

Now at $49.66 a barrel for WTI and at $53.93 a barrel for Brent on February 4, 2020, the share prices of Total (FP), Exxon Mobil (XOM) and Royal Dutch Shell (RDSB) could however constitute a profitable opportunity in a context of historically low rates.

If each of these companies invests in the energy transition and in particular the demand for natural gas, which weighs on their profits, the possible downward trend in oil prices following the breakdown of 50 dollars per barrel of WTI, unseen since January 2019, opens a potential window of strengthening for long-term investors (> 10 years).

Data on 4 February 2020

Charts show some correlation between oil prices and above mentioned stocks, however such correlation seems to have reduced over the last few months. XOM still overreacts to oil prices change, except that since January 2018, its crossed WTI downward whereas it evolved above WTI before that.

WTI, XOM, RDSB, FP comparison using a chart from TradingView.com

Disclosure: Cyceon and/or its management are long FP, XOM, RDSB.

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Cyceon.com and all its contents are for information purpose only and therefore do not constitute investment advice.