The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK ( InvestorPlace) -- After hitting a high of about $115 a barrel just a few months ago, crude oil is trading near one-year lows. Oil is down around $80 a barrel as a weakened global economy has put a damper on demand -- the 2010 low for crude was around $77 a barrel.
As a result, oil stocks have been held back this year. The broad-based iShares Dow Jones US Energy Sector ETF (IYE) is off more than 12% year to date, more than twice the nearly 6% decline of the Dow Jones Industrial Average.
Although major oil stock Exxon Mobil (XOM) has "outperformed" its peers, its shares are still in the red since January 2011.Related:
Dividends, Dividends, DividendsI have been harping on the power of dividend investing for a while as Treasuries offer meager yields and stable income investments continue to outperform the market. The power of a 3%-plus dividend cannot be understated, and such a yield is the norm for many oil stocks. From Big Oil companies like Chevron (CVX) that offer 3.5% dividend yields to dividend-rich depletion trusts like the BP Prudhoe Bay Royalty Trust (BPT) or the Whiting USA Trust (WHX) that offer mammoth but wildly fluctuating dividends, there are a host of great income plays in the energy sector now. And as oil prices climb, those dividends will only get juicer. Also See:
Baseline Demand, With Future GrowthYes, we haven't seen surging demand for crude. But don't confuse downward estimate revisions for a falling thirst for oil. The International Energy Agency reports that worldwide demand will rise by 1.2% (to 89.3 million barrels a day) this year and 1.6% (to 90.7 million barrels a day) next year. Yes, a global recession continues to take its toll. But even now demand is increasing. Just imagine what will happen once the economy turns a corner. Even if you believe that's a year (or two or three) down the road, the baseline demand should give you incentive to buy in now before crude oil consumption jumps. Related:
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