The U.S. oil market of 2020 has been like few other times in history. The Covid-19 lockdown caused demand for oil to sink rapidly as demand for oil evaporated. Even if the global economy recovers now, it would take months for the unused oil locked up in storage to be fully used before production is pumped up again. So, is buying oil stocks now prudent?

The Struggle for Big Oil Companies

As the return on assets graph below shows, even the “Big Oil” companies have struggled


Bearish Move for an ETF

The United States Oil ($USO) ETF has direct exposure to US oil prices, and its shares have fallen nearly 83% YTD. It was hurt with the negative turn of oil prices on April 20.


Are there oil companies that can weather the storm?


Analysts have detected some strong companies worth checking out. These companies are strong financially,, operate in a diversified manner and can therefore overcome the carnage. Among these are a mega-producer ConocoPhillips ($COP); refining, petrochemicals and pipelines giant Phillips 66 ($PSX); and even the aforementioned Big Oil companies such as Chevron ($CVX), ExxonMobil ($XOM), Royal Dutch Shell ($RDS.A, $RDS.B) and BP ($B). Analysts believe that these stocks have the financial strength for overcoming any downturn.

ConocoPhillips is one stock that analysts believe stands apart because it has prepared for a downturn by selling high-cost assets. That cash has enabled it to strengthen its balance sheet. This year, it entered with cash worth $8.4 billion. Its leverage ratio was also second lowest in the sector. It has also managed to slash cash outflows to adjust to the lower oil prices. Flexibility and financial strength are in its favor right now.


The content of this message and its attachments are intended only for informational and educational use for the intended recipient and may contain confidential and privileged information. If you are not the intended recipient, any dissemination, distribution, or copying of this message or its attachments is prohibited. If you received this message in error, please notify the sender by replying to this email immediately and delete this message and its attachments from your computer. This content does not constitute an offer to sell or a solicitation to buy any security or instrument which may be referenced upon the site, or an offer to provide advisory or other services by the writer or company employing the writer in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. We explicitly disclaim all liability for any action taken based on any information contained in this writing. All communications sent to or from TradeZero America, Inc. are subject to archive and review by TradeZero America, Inc. and by regulatory and law enforcement authorities.