Oil Market Surge Sets Stage for Long-Term Gains in Oil Service Companies

The oil market's surge has significant implications for the global economy and investors. European Central Bank President Christine Lagarde recently acknowledged her lack of understanding about refining margins six months ago, highlighting the importance of this sector in the global energy production.

The oil industry accounts for 40% of global energy production and 96% of transportation fuel. The recent disruptions in the market due to geopolitical events have had a profound impact on the global economy. These events include the nationalization of Venezuelan oil, sabotage of Nord Stream pipelines, Russia-Ukraine war, Middle East conflict, Iranian attacks in the Strait of Hormuz, and Houthi attacks in the Red Sea.

Economist John Arnold noted that the underlying supply posture was already bullish before the recent surge. The increased investment and higher prices have provided a boost to oil companies, but their share prices are not yet at all-time highs.

Schlumberger (SLB) is one of the largest oil service companies and has benefited from the current disruption. Oil service companies like SLB benefit from increasing oil production, which is driven by investment in extraction.