In today’s situation, it is easy to turn a blind eye to cyclical companies that export a lot to the US and thereby have a bleeding share price. In parallel with the trade war, the price of oil has fallen by a whopping 15% in April alone. There are many popular distributors out there in oil and share prices have fallen quite significantly given the falling oil price.

A low oil price at the moment

If we go back in time and look historically, commodity stocks are actually some of the most vulnerable when the economy crashes.

During the pandemic year, we saw how many companies with a focus on oil and mining lost about half of their value. The same applies to the financial crisis in 2008. If you bought then, you made a fantastic deal. It is always easy to be wise in hindsight.

The price of WTI oil has developed a straight line downwards and is now at $60 per barrel.

 

Why oil is falling during the trade war

The main reason is of course the increasingly escalating trade war between the US and China. China is one of the world’s largest importers of crude oil, and growth around the world is now at risk of being slowed.

In concrete terms, the oil market is not directly affected by the tariffs, but what the market is worried about is the risk of a crash in the economy. As I wrote before, history has shown that this is not good for the oil companies.

Then we have another factor that has weighed on the oil price, namely when the oil cartel Opec+ last week decided to increase production by 411,000 barrels per day next month (May). The increase was already known, but when production was supposed to be three times as large as expected, the market became worried.

The oil price has averaged around $80 since 2021. If the economy suffers even more due to the trade war, we will clearly see lower levels than today’s $60. But if you don’t think the trade war will last, the oil price will go up again.

In a dividend portfolio, it is of course not a must to own any oil shares, but one advantage is the high dividend yield, which in many cases has actually been fairly stable over time. Most shares have also given a nice total return. They have not really been such bad investments. Then of course you would have made more money if you had put everything in Investor or Latour.

I have chosen to add a little to Aker BP during the crash but have not added any other companies yet. There are many who are quite negative about this type of stock considering that the future is quite uncertain. For the rest of my life, I think that oil will still be a must.