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ANALYSIS: Is now the time to go overweight oil majors?

On Tuesday (2 May) UK oil giant BP redeemed itself from a difficult 2016, reporting first-quarter profits nearly three times higher than the year prior.

BP’s share price rallied on the back of the report and had gained 3% within the first fifteen minutes of trading on Tuesday morning. As Royal Dutch Shell gears up to report this Thursday (4 May) many investors may be hoping for another golden day for the sector later this week.

Given the long-term uptick in US shale-gas production and persistent volatility in the price of Brent crude, many other investors have become bearish towards oil firms in recent months.

However, Artemis Investment Management’s Richard Hulf believes that there is a significant amount of upside left for the sector.  

More than the oil price

As co-manager of the group’s Global Energy Fund, which invests exclusively in the energy sector and predominantly in oil and gas companies, Hulf’s bullish take may not be surprising.

But he says the rising fortunes of the West’s big oil firms have been about more than just a rising oil price. On the contrary, he argues there is an observable sea change taking place in the sector, which is being driven by fundamentals.

“The oil sector is a much more profitable business now than it was at any point in the last 15 to 20 years and that is not just about cost inflation,” he says.

“They have actually changed the way they have done things. They’re standardising, trying not to redesign their machinery every time they need a new rig.

Kristen McGachey

Kristen joined Last Word Media and the world of financial journalism in April 2016, leaving behind a career in a legal publishing firm as a senior researcher turned assistant editor. This native Angelino...

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