The European Union’s energy crisis isn’t improving after they approved new sanctions against Russia, which include a price cap on the maritime trade of Russian oil. To make matters worse, OPEC+ agreed to cut production by 2 million barrels a day starting in November, hoping to keep the oil cost over $90/barrel. We will see if they come close to that amount since they’ve already been struggling to meet previous production targets.

It may not be an issue if a looming global recession cripples demand. However, as China’s Zero-Covid approach changes and more of the country is open for extended periods of time, we could see their demand for oil climb, which would create a spike in oil prices.

Energy is now the only sector that remains positive year-to-date, so let’s take a look at one company that is in the energy sector and could profit from an increase in oil prices.

Shell plc (SHEL) operates as an energy and petrochemical company in Europe, Asia, Africa, and the Americas. Oil prices are on the rise, the energy sector remains strong, and Qatar has agreed to bring on Shell and ExxonMobil as partners in the second phase of the Gulf country’s giant liquified natural gas (LNG) expansion.

Shell has earnings coming out at the end of October, but if you’re looking for a short-term trade, you could do a covered call.

The $55 call that expires on 21 OCT 22 is going for $1.15. The current price is $54.02. If Shell closes above $55 by October 21, you would keep the $1.15 from the call you sold as well as the $0.98 from the stock movement. Your shares would be called away, but it would give you a 4% gain in 16 days.

If the stock doesn’t close above $55, you keep your shares with a new cost basis of $52.87 ($54.02 – $1.15). You could then sell another covered call the next month, as long as you’re comfortable holding over the earnings announcement.

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Jeff
Guest Writer, Filthy Rich, Dirt Poor
Editor, Wealthy Investor Society