Big Oil stocks such as BP PLC (NYSE: BP), Chevron (NYSE: CVX), ExxonMobil (NYSE: XOM), and others have not fared well in recent market action.
ExxonMobil, the world’s largest oil and natural gas company, is down for the last quarter and six months of market action. Chevron has fallen for the last month, quarter, and six months of trading. The shareholders of BP PLC have suffered for the last month, quarter, six months, and year (chart below).
All are down for 2014.
But a recent report from Bloomberg brings bullish news to Big Oil stocks. The Bloomberg report projects that oil consumption will rise to 99 million barrels by 2019. That is almost a ten percent rise from the current level.
That is a very positive outlook for oil and natural gas stocks.
The rise in demand will be led by China. India will need more energy assets to for its burgeoning economy. Oil and natural gas are the logical choices: coal is too dirty, with China trying to clean up its environment. India has a goal of improving its environment, too. Alternative energy such as wind and solar power is not close enough to meet the needs of the mass market.
For long term investors, all of that is good news for those holding Big Oil stocks.
In the short term, the dividend income from Big Oil stocks have eased the pain, somewhat. BP PLC, Chevron, ExxonMobil, and other oil companies have generous dividend policies. The dividend yields are above average. Many also have a history of increasing the amount of the dividend, too, to reward income investors. That rewards long term shareholders with a raise simply for not selling shares of the Big Oil stock!
The Bloomberg report certainly points to even larger gains ahead as global demand for oil and natural gas rises due to greater economic growth.