Watch out for Saudi attack hype as pumpers seek to push up small cap oil stocks.

Following the attack on Saudi oil facilities over the weekend, KeyBanc analyst Leo Mariani upgraded Whiting Petroleum (WLL), SM Energy (SM), Jagged Peak Energy (JAG) and Centennial Resource (CDEV) to Overweight given the companies’ exposure to higher oil prices. Suntrust upgraded Centennial Resource and Mizuho raised its rating for Parsley Energy (PE) adding it is “prudent to add exposure to U.S. oil production”.

I call bullspit.

If the catalyst is to add exposure to oil because of the recent Saudi Arabia attacks, what do you think is going to happen when the Saudis get their oil production back online? By logical necessity, the catalyst must be to reduce exposure to oil the further out we move from when the attacks took place.

What is happening is that analysts are pumping small cap oil stocks they already hold, and they will dump into the pump unless even more oil production facility attacks take place.

Don’t fall for the pump and dump folks. If these stocks were not buys before the Saudi attacks, they are not suddenly good buys after the attacks. Yes, the price of oil is having a short-term spike higher from reduced supply, but that is a very short-term catalyst and so a momentum or swing trade is the only way to play these oil stocks IMO.

Saudi Arabia News
Oil