Imagine you’re in a big room where people are chatting and having a good time, but suddenly, everyone has to leave because of a big mess. This mess is like the COVID-19 pandemic, which caused many businesses to close and people to stop traveling. This big change meant that oil, which powers cars, planes, and factories, was suddenly not needed as much, so the price of oil dropped.
Now, let’s think about what happens when the mess starts to get cleaned up, and people can come back into the room. Everyone is excited to return, businesses open up again, and people start traveling and driving more. As things get back to normal, the demand for oil goes up because cars, planes, and factories need it to run. This is when the price of oil starts to rise again because there is more demand for it.
Here’s why investing in oil stocks during this recovery period made sense:
The World Was Coming Back to Life: As COVID restrictions eased, people started traveling and businesses reopened. This meant more cars were on the road, more planes were flying, and more factories were running. All these activities need oil. So, with more demand for oil, its price went up.
Oil Production Had Been Cut: During the pandemic, oil companies had to reduce how much oil they were producing because no one was using it. When the world started using oil again, the supply was lower than the demand. This made oil prices go up, which was good news for oil companies.
Look at the Bigger Picture: Investors who pay attention to what’s happening in the world noticed that as things got back to normal, oil was going to be needed more. They saw that the price of oil would likely go up and decided it was a good time to buy shares in oil companies.
In simple terms, just like how you might notice a crowded room getting lively again and decide it’s a good time to join in, investors saw that as the world recovered from COVID and needed more oil, it was a great opportunity to invest in oil stocks. This was because oil prices were expected to rise as demand increased, and those who invested early in this recovery saw significant gains.
Oil stocks experienced a remarkable rebound during the COVID Recovery theme, with significant gains over a two-year period. Here’s a look at the performance of major oil stocks:
BP (British Petroleum)
Pandemic Low: $14
Recovery Peak: $37
Percentage Gain: Approximately 164%
Call Options: BP call options saw gains of around 300%.
Chevron (CVX)
Pandemic Low: $51
Recovery Peak: $188
Percentage Gain: About 269%
Call Options: CVX call options delivered returns of up to 400%.
Occidental Petroleum (OXY)
Pandemic Low: $10
Recovery Peak: $75
Percentage Gain: Roughly 650%
Call Options: OXY call options achieved gains of approximately 600%.
Schlumberger (SLB)
Pandemic Low: $11
Recovery Peak: $60
Percentage Gain: About 445%
Call Options: SLB call options provided returns of up to 500%.
ExxonMobil (XOM)
Pandemic Low: $31
Recovery Peak: $125
Percentage Gain: Approximately 303%
Call Options: XOM call options saw gains of around 350%.
Energy Select Sector SPDR Fund (XLE)
Pandemic Low: $30
Recovery Peak: $90
Percentage Gain: About 200%
Call Options: XLE call options delivered returns of up to 300%.
These gains highlight how oil stocks, boosted by the recovery from the pandemic, offered substantial returns for investors who recognized the opportunity. The dramatic rebound in oil stocks during the COVID recovery was driven by several key factors that made investing in the sector a logical and potentially lucrative decision.
