Resources overall had a tough 2018. Interestingly, it was at a time when the U.S. was living a strong economic boom, asserts Omar Ayales, commodity sector expert and editor of Gold Charts R Us.
Crude oil had held its own, but pressures for lower oil and the fear of slacking demand, has pushed crude to extreme low levels.
Interestingly, crude is testing $40, a mega multi-decade support level. It slipped below that level only once back in early 2016. A decline that preceded a rise that would see crude more than double in price during the following two years.
As the global economic recovery continues, and sovereigns around the world work toward balancing budgets or at the very least, getting their fiscal situations back on a healthy path, $40 is increasingly looking like a key support level once again.
We’re also bullish on crude and have a price target of $60 for the first quarter of 2019, nearly a 40% increase from today’s prices. Energy shares have been harder hit, and they’re extremely bombed out, especially when compared to crude oil itself.
Moreover, the energy boom in the U.S. is poised to continue as the U.S. has become a net exporter of crude oil for the first time ever.
Denbury Resources (DNR) is a resource company with 97% of its business derived from the production of crude oil and its derivatives. It was trading above $6 just a few months ago and has fallen sharply with crude oil’s decline. It’s now below $2.
Any pick up in the price of crude will surely push DNR back to more normal valuation levels. Our price target for the stock during the first quarter of the year is $2.75-$3.
