Top Ways to Trade Saudi Arabia’s Latest Oil Cuts

Jun 5, 2023

Keep an eye on oil stocks.

Oil is on the move after Saudi Arabia’s decision to cut oil production by another million barrels per day starting in July.

“The market did not widely expect the Saudi decision to cut production by 1 million barrels per day unilaterally,” President of Rapidan Energy Bob McNally told CNBC. “It once again demonstrated that Saudi Arabia is willing to act unilaterally to stabilize oil prices.”

Also, as noted by Politico, “The cut follows Saudi Energy Minister Abdulaziz bin Salman’s sharp warning to speculators betting on lower oil prices. The Saudis need sustained high oil revenue to fund ambitious development projects aimed at diversifying the country’s economy away from oil. The International Monetary Fund estimates the kingdom needs $80.90 per barrel to meet its envisioned spending commitments, which include a planned $500 billion futuristic desert city project called Neom.

While you can always buy oil stocks, like Occidental Petroleum (OXY), Chevron (CVX), and even Exxon Mobil (XOM), you can own dozens of related oil stocks with ETFs, such as:

SPDR Energy Select Sector ETF (XLE)

With an expense ratio of 0.12%, the XLE ETF provides exposure to companies in the oil, gas and consumable fuel, energy equipment and services industries, as noted by State Street SPDR. Not only does an ETF allow for diversification, you can buy it for less than a single one of its holdings.

SPDR S&P Oil & Gas Exploration & Production ETF (XOP)

With an expense ratio of 0.35%, the ETF provides exposure to the oil and gas exploration and production segment of the S&P TMI, which comprises the following sub-industries: Integrated Oil & Gas, Oil & Gas Exploration & Production, and Oil & Gas Refining & Marketing, as noted by State Street SPDR. Some of its top holdings include Callon Petroleum, SM Energy Company, Devon Energy Corporation, EOG Resources, and ConocoPhillips, for example.

iShares Global Energy ETF (IXC)

The iShares Global Energy ETF seeks to track the investment results of an index composed of global equities in the energy sector. Some of its top holdings include Exxon Mobil, Chevron Corporation, BP PLC, Total SA, and EOG Resources.

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