Oil prices have been perking up over the past few days, after briefly trading under $70 per barrel. Part of the move is because of the potential for escalating violence in the Middle East, particularly between Iran and Israel.
However, there’s likely more upside ahead for oil. Overall production has been held lower by OPEC in recent years, and demand remains high. As with many other commodities, oil looks like a relative bargain in the markets today.
That could bode well for energy companies across the spectrum, from big, international plays to smaller exploration companies. For most investors, getting back into the oil market should start with one of the larger players, such as Chevron (CVX).
Chevron is down 8% over the past year, far lagging the overall stock market. But shares are inexpensive at 12 times forward earnings, and the oil giant has a fairly strong balance sheet. Revenues are up over the past year, even though earnings growth has declined.
Action to take: Shares have started to trend higher in recent weeks, making Chevron a value play with strong momentum behind it now. That makes shares worth a buy in the low $150 range.
At current prices, Chevron also pays a 4.3% dividend, making for a strong long-term holding here.
For traders, the March 2025 $170 calls, last trading for about $3.40, could leverage a further move higher for shares into a high double-digit return.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.