Oil exploration companies positioned to leverage current oil prices, says trader

The energy sector has been through a rough patch, but that is unlikely to last for long. In an interview with CNBC’s Trading Nation, according to Boris Schlossberg of BK Asset Management, this year’s leading performer, which was the worst in July, is likely to maintain the first spot with investors realizing the extent of the energy sector’s demand-supply imbalance.

Boris prefers oilfield service Halliburton company

Boris told CNBC’s Trading Nation that despite the COVID-19 delta strain concerns keeping a lid on gains, once it goes away, there will be a demand surge with limited supply. His top choice in the sector is oilfield service firm Halliburton company (NYSE: HAL) which he was long through a $19-$22 call spread that expires in November. On Friday, the stock was on an upward trend gaining 2.5% to $19.91. He said:

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“Even though it’s a fracking company in a lot of ways, fracking at these levels of oil prices is the best market since 2017, so, I think it’s going to perform very well.”

Boris said that the firm is also employing cloud computing and AI in streamlining its processes to make it asset-light, which is an advantage for invests. The BK Asset Management FX strategy managing director added:

“All of this stuff is going to translate into much better margins and earnings for the company as we go forward, especially if oil just simply stays at these levels. It doesn’t even have to rally. Just as long as it stays at 65 through the end of the year, I think we’re going to look very golden with Halliburton.”

Todd Gordon cautious with energy stocks

On Friday, West Texas Intermediate crude oil was up marginally to $69.63. However, TradingAnalysis.com founder Todd Gordon told CNBC’s Trading Nation that investors should be cautious with energy stocks. He said XLE is starting to move out of favor compared to the benchmark S&P 500 as technology rotates into favor. Gordon stated:

“We’re going to need energy for sure, but in terms of in our portfolio, I’d say no.”

He recommended that for those that are looking for the exposure, they can consider production and explorations stocks instead of service and equipment plays. He added:

“Exploration and production is the industry to watch within energy, and if you want a name, try a name like Devon.”

Devon (NYSE: DVN) opened on Friday 3% up at $27.41.