Oasis Petroleum Inc. (NASDAQ: OAS) is running for the top in the market this morning, trading on gains of more than 13%. However, OAS isn’t the only oil stock that’s seeing dramatic gains. Here’s why this, and other, stocks in the sector are moving for the top:
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Here’s Why OAS Stock Is Up
Oasis Petroleum, as its name suggests, is a company that is centered around the commodity commonly called black gold… oil. Honestly, oil has seen a bit of a wild ride.
With the COVID-19 pandemic in mind, school busses aren’t circulating, consumers are driving far less, activities including boating and other fuel-intensive equipment is halting. Demand for oil is falling dramatically, and the market has taken a hit.
However, recently, the oil market has started to rebound, and that’s great for OAS. Around the world, we’re watching as oil producers hit the off switch. Production is falling dramatically as a result, which is propping up hopes that gains will continue.
In fact, OAS has even pulled back production. Recently, a story broke that the company would be winding down all drilling in Bakken, cutting its crude oil production quite dramatically.
On top of this, we’ve seen some tension between the United States and Iran, with President Trump tweeting that the United States will forcibly handle any threat to US ships from Iranian gunboats.
Of course, any time tensions rise in the oil-rich middle east, fears grow that oil production facilities, refineries and other oil-related facilities will be the target of attacks, further putting a strain on supply.
So, while demand hasn’t picked up for oil, what we are seeing is that the world is working to squeeze supply, and that’s exciting for oil investors.
Oil Investors Wait For The Big Boom
As mentioned above, we’ve seen several companies in the oil and energy sector climbing. This is not just an Oasis Petroleum thing. The truth of the matter is that investors seem to be jumping into the sector, waiting for the big boom.
Think about it. People are not going to be stuck in their homes forever. While the COVID-19 pandemic is daunting, it too shall pass. When COVID-19 does pass, the cuts that producers are putting in place have the potential to put a squeeze on the availability of the commodity.
Think about it, when the world suddenly starts going outside, oil companies will race to catch up to demand, but there will likely be a period where demand far outpaces supply. At this point, the price of oil is likely to climb, and OAS stock and others like it will most likely follow it up, creating a huge opportunity.
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