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Since the six-year oil price broke below its 40-week average last September, buy-recommended stocks Chevron (CVX) and ConocoPhillips (COP), both with integrated downstream operations, have maintained positive momentum with stock price above the 200-day average.

Independent producers with stock price below the 200-day average are out of favor with investors. Nonetheless, buy recommendations among those stocks have sound appreciation potential because their stock prices reflect long-term oil price, typically $45 a barrel or less as we see it. We like the value in buy-recommended Anadarko (APC) and would manage the extra financial leverage by adjusting the size of equity commitment to match a full unlevered portfolio weighting.

Meanwhile, the price of oil for delivery over the next six years at $63 a barrel is a better indicator of long-term value than the widely quoted near month price that closed as low as $55.59 on Thursday, January 4. Six-year natural gas closed higher on the week, showing little weakness on bad weather news, probably because the natural gas price is equivalent (6:1) to a low $44 a barrel.

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oil futures

Source: Chevron, ConocoPhillips & Anadarko Enjoying Positive Momentum