buy this stock to play that rebound

Oil will climb back to $115 a barrel and a great way to play that rebound is Chevron Corporation (NYSE: CVX), says Rob Thummel. He’s a Managing Director at TortoiseEcofin.

OPEC approves only a tiny increase in output

His outlook is essentially based on the inability of OPEC+ to “meaningfully” increase its output and meet the continued surge in global demand. This afternoon on CNBC’s “Power Lunch”, Thummel said:

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We’ll see demand rise as China comes back online and people continue to fly. That will result in an undersupplied oil market. And what we know is that when inventories go lower, prices go higher.

He’s convinced the global demand for conventional energy can withstand a mild recession, especially as the impact of Russian sanctions materialise in the coming fall.

Despite the energy news on Wednesday, WTI Crude is at $91 a barrel at the time of writing.   

Thummel explains why he likes Chevron stock

Thummel likes Chevron stock down more than 10% from its year-to-date high for the dividend yield that currently sits between 3.0% and 4.0%. He’s also constructive on “CVX” for its continued investments in renewable energy.

It has double the S&P 500 dividend yield. But more importantly, it’s providing more energy and less carbon. It’s made significant investments in renewable fuels. So, the changing supply source of energy could be a benefit to Chevron going forward.

Last week, Chevron reported record profit for its fiscal second quarter on higher prices and said it will buyback up to $15 billion worth of its stock in 2022.

Wall Street currently has a consensus “overweight” rating on the stock with upside to $179 on average, or about a 15% increase from here.