How To Trade And Invest In Oil Stocks (Trading Strategy And Seasonality)

Last Updated on October 16, 2021 by Oddmund Groette

There are plenty of seasonalities in the markets.

In this article, we look at the seasonality of energy stocks. It turns out that all the gains since 1986 have come from December until the end of May, while the other months have produced negative returns. Thus, being invested only half the time might be a good idea.

Seasonalities in the markets

We have already covered some well-known and tradeable seasonalities in previous articles:

But what about energy stocks?

Seasonalities in energy stocks

It turns out that energy stocks have strong seasonalities. Just look at the 35 years of data of the ticker FSESX, Fidelity’s energy fund:

The first column indicates the month. April, February, and December are the three best months. The return is measured from the close of one month to the close of the next month.

Actually, all the gains have come from being invested only from December until the end of May. The other months have produced huge negative returns.

It has paid off handsomely to be invested from the close of November until the close of May:

The CAGR is 10.2% compared to buy and hold of only 2.75%.

If we were only invested during the bad months, ie. from June until the end of November, the equity chart looks like this:

The CAGR is a whopping negative 7.2%.

The ten largest current components of the FSESX are these:

Schlumberger Ltd SLB 19.74%
Baker Hughes Co Class A BKR 12.57%
Halliburton Co HAL 7.22%
TechnipFMC PLC FTI 6.27%
ChampionX Corp CHX 5.78%
Cactus Inc Class A WHD 4.58%
National Energy Services Reunited Corp NESR 4.33%
Oceaneering International Inc OII 4.02%
ProPetro Holding Corp PUMP 3.76%
NexTier Oilfield Solutions Inc NEX 2.91%

Conclusion:

The oil seasonality has been consistent for at least 35 years, but perhaps not as consistent as it was before.

Is this a tradeable seasonality? Only you can find out, but this is not a wager we put a huge amount of money on.

 

Disclosure: We are not financial advisors. Please do your own due diligence and investment research or consult a financial professional. All articles are our opinions – they are not suggestions to buy or sell any securities.