Following the Smart Money: Oil Service Stocks Lead the Way

In recent weeks, I’ve been giving special attention to the oil and gas market.

And I’ve backed that up with several trade recommendations for my paid readership group.

In terms of a potential recovery in the oil and gas market, we’re locked and loaded for 2026!

But here’s the thing…

Underlying oil and gas prices remain weak; take the benchmark WTI Crude Oil price:

Source: Trading Economics

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Crude oil is currently trading below $60 per barrel and remains stuck in a perennial bear market, offering little prospect for price recovery.

For traders, there’s little to be excited about here.

So, why are we moving on
Oil and Gas stocks?

There’s a few reasons…

One positive aspect of the oil and gas market is that a select group of stocks in this sector is displaying strong upward momentum.

I’ll get to these in just a moment.

Broadly speaking, however, certain oil and gas companies are exhibiting a more bullish set-up compared to the underlying price.

That might not be so apparent in the big-name Aussie players like Woodside or Santos.

But venture into the world’s largest market for this sector, and there are clear signs of an emerging trend forming across numerous oil and gas companies.

And this is where the big prize could be for investors in 2026…

American Oil and Gas Stocks

No doubt, the Aussie oil and gas market is a minnow compared to the world’s largest producer, the US.

For example, crude oil production in Australia averaged 437,010 barrels per day from 1993 until 2025.

Meanwhile, crude production in the US averages around 6.5 million barrels per day!

Compared to the US, Australia is tiny, so it’s difficult to gauge the sector’s momentum if you’re only focused exclusively on the ASX.

That’s why, if you’re serious about investing in the oil and gas market, you need to pay attention to US companies.

But US markets also offer more opportunity…

You’re not limited by a tiny handful of producers; there are hundreds of active oil and gas stocks in the US, ranging from large, medium, to small-cap firms.

You can also venture into some rather niche opportunities, like royalty companies.

These companies have no desire to get their hands dirty extracting oil; instead, they engage in strategic land acquisitions and collect royalties from the operators, who are obliged to share a portion of their profits.

Then there’s the sector I’m most interested in right now…

The oil and gas service market.

Despite lacklustre crude prices, many US oil and gas service stocks are displaying positive price action.

And that could be a key thing to watch.

In the resource market, service stocks are often early-cycle movers, offering a bellwether for investors that could signal a strengthening market.

Rising activity feeds into the service companies’ revenues, which may be one reason why these stocks tend to rise early in the cycle.

One way to capitalise on that could be simply an ETF that focuses on oil and gas service stocks.

Here’s one example that could be worth a look: The VanEck Oil Services ETF [NYSE: OIH]:

Source: Trading View

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Note how this chart is evolving into a healthy setup…

A sequence of higher lows, with prices accumulating into a stronger uptrend. This is the type of set-up that excites me as an investor.

But you could take it one step further:

Focus on specific opportunities within this ETF.

You see, the oil and gas sector (itself) is full of diverse opportunities for investors.

Some companies build new wells, others assist in the actual recovery of oil and gas, while others may focus exclusively on the transportation of this critical commodity.

As an investor, it requires a thorough investigation to identify potential leveraged opportunities, but it could be well worth your time.

For example, many producers in the US are facing falling production due to ageing wells.

To keep production flowing, these wells will require remediation, and certain service companies are specialised in this type of engineering.

It’s the type of specialty that could serve them extremely well if producers redeploy investment back into their wells.

It’s just one of the ways I’m targeting this sector.

In fact, last week, I issued a new recommendation based on this theme, an oil and gas service stock serving one of the largest gas producers in the US.

That was after one of our other service stocks was taken over by a prominent North American private equity firm over the holiday break.

There is no doubt that the smart money is moving into this niche sector. If you’d like to find out more, you can do so here.

Until next time.