Given the pressure that higher energy prices and the Middle East conflict are putting on the global economy, it makes sense to think President Donald Trump and Iranian leaders might find a way out of the crisis relatively soon. In this scenario, oil prices WBS00 CL00 BRN00 would drop quickly, and so would energy stocks NYE.ID. It's almost impossible to sell a condo unit these days: 'I feel trapped' Stocks face a growing list of threats — so why are investors staying so calm?
I have $125,000 in credit-card debt. Will $17,000 a month in income, including disability, affect my bankruptcy? 90% of retirees are making this miscalculation with their savings As Warren Buffett's reign ends, fans should sell Berkshire — and buy these stocks instead There's one problem with this positive outlook: Energy-sector insiders aren't buying it. Instead, they are buying their stocks — suggesting they think the stocks go higher from here, not lower.
In the past few months as oil prices and energy stocks climbed, insiders at over 35 energy companies have put around $55 million into their stocks. Some of the bigger examples since late May include the U.S. energy producers Matador Resources MTDR, where insiders including the CEO and CFO have purchased over $1.5 million in stock, and Vitesse Energy VTS, where a director bought $1.6 million in shares. The CEO at the refiner HF Sinclair DINO bought shares worth $1.3 million in mid-August.
True, the insider buying has happened at smaller energy companies, not at giants like Chevron CVX or ExxonMobil XOM. But that doesn't mean the insiders know the sector any less. In my experience, stretching over two decades, of tracking insiders, sectorwide buying like this — even at smaller companies — is a bullish signal.
What explains the insider buying at a time when energy prices and stocks might soon retreat hard? I recently spoke with some energy-company insiders and sector analysts to find out. Following are three reasons for the disconnect.
Energy-sector veteran Rob Thummel, who helps managed the Tortoise Energy Fund TNGY, thinks the war with Iran will end after the U.S.'s midterm elections. But the new price floor for West Texas Intermediate crude, or WTI, will be $75, or around $10 above where it traded prewar. That's because traders will price in geopolitical risk again, and countries have to rebuild oil inventories, Thummel told me in a recent interview.
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