With 2013 in the record books, those owning shares of oil companies should be very pleased.
It wa a good year across the sector. Major oil companies like ConocoPhillips (NYSE: COP) rose more than 25%. Firms like YPF SA (NYSE: YPF) posted strong recoveries, as it was up close to 130%. Octagon 88 (OTC: OCTX), a small cap with promising holdings in Canada, jumped more than 90% for 2013.
As detailed in previous articles on this site, demand was strong for oil.
That was due to the two major economies, China and the United States, continuing to recover from The Great Recession. Both countries are importing and exporting at record levels, according to a recent article in The Wall Street Journal. That is bullish for the global economy as both the United States and China are needed to lift markets around the world. Since that happened in 2013, the demand for oil increased, too.
The global demand for yield also lifted oil stocks.
In a low interest rate world, stocks that pay strong dividends will do well. The oil sector has a strong dividend framework. At present, the average dividend for a member of the Standard & Poor’s 500 Index is around 1.9%. For ConocoPhillips, it is 3.9%. Royal Dutch Shell (RDS-B), the second largest oil company in the world, pays a dividend of well over 4%. So does BP PLC (NYSE: BP).
This was shown by how well the exchange traded funds did for oil and natural gas in 2013.
United States Natural Gas (NYSE: UNG), the exchange traded fund for natural gas, is up more than 8% for the last month of market action. United States Oil (NYSE: USO), is trading higher by more than 5% over the same period. Both exchange traded funds were up for the year. It is comforting to investors that each finished 2013 so strongly.