Prices are up pretty much across the board in 2021, but nothing seems to get quite as much attention as the “pinch at the pump.” We can always hold off on getting that deck redone, or cut back, but not too many of us can escape rising gas prices.

Now, as you’ve probably heard, most of the price hikes we’ve seen over the past few months – oil and gas included – are linked to the reopening and reheating of the U.S. economy. The most recent rally has a lot to do with OPEC’s decision to restore 2.1 million barrels per day worth of production, which gets us much closer to “normal,” (read: “pre-pandemic”) levels of production and demand.

A gallon of regular unleaded costs nearly $3.08 on average nationwide, up nearly a buck from last year and about $0.04 from last month. Crude oil itself is at $69 a barrel, only just off its highest price in three years, a hefty $23 a barrel more expensive than in January 2021.

That makes oil a sector you need to be in if you’re out to bank “asymmetric” low-risk, high-reward profits. Unlike a lot of the “reopening stocks” that have spiked and tanked and spiked and tanked over the past year, there’s no stuffing the toothpaste back in the tube here.

As impressive as oil’s run toward $70 has been, there’s still much more upside ahead if you know where to look.

Now, right off the bat, I’ll tell you my picks here aren’t the so-called “supermajors” like Exxon Mobil Corp. (NYSE: XOM) or Chevron Corp. (NYSE: CVX) – those will set you back nearly $63 and $110 at this point. I’m not sure the upside is there to justify the risk – let Wall Street foist those off on their clients.

Instead, I’m going to name three, frankly, dirt-cheap oil stocks, two of which you can actually trade for big profits by the middle of summer.

You can buy all three of them for under $30 right now, less than the price of a full tank of gas in most places…

Why Cheaper Is Better in This Sector

In my free Profit Takeover service, we tend to target smaller stocks to buy and trade. It’s part of our strategy of going after asymmetric returns, where the risk/reward picture is tilted radically in our favor – and I mean “radically.”

It takes a lot less for a $4 stock to become an $8 stock than it does for a $400 stock to hit $800, and besides, if you’re trading options, when that $4 stock hits $4.10 or $4.25, you can easily double your money anyway.

That’s why I’ve picked Transocean Ltd. (NYSE: RIG). The world’s largest offshore driller, based in Switzerland with a presence in 20 other countries, is the least-expensive stock we’ll look at today. Back in November 2020, when West Texas Intermediate (WTI) crude was trading under $41 a barrel, these shares were trading for $0.67 – just sixty-seven cents. Today, a barrel of crude will set you back 73% more than in November, but RIG shares have come up more than 511%.

I see Transocean running up to $8 from here, or a little less than a 100%, as oil heads toward $75 a barrel by the end of July. For the adventurous trader interested in tacking on even more profits, RIG July 30 2021 $4 calls look mighty good right now, too.

Energy Transfer LP (NYSE: ET) is a pipeline company moving propane and natural gas, and it’s actually been on my Profit Takeover watch list for quite a while. Energy Transfer is trading for a little more than $11.10 a share at midday Tuesday, just off a one-year high. It recently outperformed larger competitors Kinder Morgan Inc. (NYSE: KMI) and Enterprise Products Partners LP (NYSE: EPD), and the stock is up more than 82% year to date. But here’s the interesting thing: Back in 2018, which was the last time we saw oil prices like this, ET stock was trading between $14 and $19. I see Energy Transfer moving up 36% from here, hitting $15 as crude hits $75, and there’s a lot more headroom for this stock as crude invariably moves above $75. Traders looking to juice what promises to be massive gains should look at the ET July 30, 2021 $11.50 calls – they’re less than $0.50 each right now with incredible payoff potential.

Marathon Oil Corp. (NYSE: MRO) is in fact the “priciest” pick today, ever so slightly off its yearly highs, at $13.68. Again, no surprises here, its fortunes are closely tied to the price of skyrocketing crude. Houston, Texas-based Marathon is into hydrocarbon exploration, looking for promising and increasingly lucrative oil and natural gas deposits all over. This stock has better than doubled so far in 2021, and I think it’s just getting started. It’s not out of the question that this stock goes beyond $16 by July, possibly much more if crude prices accelerate. The options picture is a little less cut-and-dry here, but I’ll be in touch with my Profit Takeover readers the minute I see something promising.

— Mark Sebastian

Source: Money Morning