Oil Crash 2020 And Coronavirus
Oil Stocks:- The oil prices have taken a serious hit because of the Russia-Saudi Arabia oil price war 2020. This crisis deepened when the Coronavirus spread across the world. Oil prices have declined by more than 60 percent due to the sudden decline in demand. It has taken a huge hit on the stock market. On the other hand, production has not slowed down and has led to problems in stocking excess oil. The stock price of most of the companies has declined, but there are still companies that are still good to invest in.
The following points can help you in investing in oil stocks in 2020:
Stay Clear From Individual Producers
It is better to stay away from individual oil companies that depend on oils’ production for their earnings. These companies have taken the biggest blunt and will probably have a load of stock sitting idle. Phillips 66, the American MNC, will be a safer option over others. The company does everything other than working in oilfields, i.e., marketing, refining, and pipeline. It is an established MNC with a management expert in the field of energy.
Green For Financially Healthy Companies
This sudden decline in demand and fall in prices will lead to the bankruptcy of many financially weaker oil companies. Some companies have made financial provisions for emergencies and sudden depression-like T.C. Energy. T.C. Energy is a Canada based energy company, which has a solid cash flow. This supported by an excellent credit rating, which is better than its competitors. Even now, the rate of return on the dividend is more than 5%.
The prices of oil have even dipped down to negative in the U.S., where sellers were paying buyers for taking their oil. The demand has gone down drastically due to the pandemic, but the picture after two years looks better and brighter. The demand for gasoline is very low now, but people will hit the road with their cars in a year or two, and the demand for gasoline will rise considerably. A company like Casey’s General Store, a company with a chain of gas stations, will return to business. Casey’s will be affected considerably lower than its peers.
Distance from the US
A US company dropped the price to negative, which came as a shock to its investors. The U.S. economic condition seems to be getting worse, and it will be smart to look at options outside the U.S. The French-based oil company Total S.A. will be a company to look out for. Even though the pandemic has affected the company, it still gives a return of 9% on its dividend.