As society takes gradual steps towards a return to the “old” normal and energy supply concerns persist, the hydrocarbon sector finds itself on a robust growth trajectory. Notably, options traders are showing a distinct fondness for Suncor Energy (NYSE:SU), a sentiment highlighted by Barchart contributor Will Ashworth earlier this month. This fondness continues to manifest, propelling SU stock to a modest gain of over 5% in the past week.
So, what’s driving this upward movement?
From a fundamental standpoint, CNN Business observed on August 4 that energy stocks have been staging a recovery after a period of underperformance earlier in the year. Interestingly, this underperformance coincided with OPEC+ producers’ announcement of output reductions to bolster crude oil prices. Nonetheless, the sector has begun to respond positively. Additionally, Saudi Arabia’s decision to slash its output by one million barrels per day in July has likely expedited this recovery.
Furthermore, there’s a rapid shift towards complete normalization in social circumstances, encompassing changes in the workplace as well. Employers are increasingly recalling their staff to physical offices, which bears significant implications for traffic volumes. This, in turn, could drive up demand for integrated oil companies like Suncor. Notably, the number of vehicle miles traveled has shown a consistent uptick.
Amidst these trends, Suncor’s stock stands out as an anomaly within the energy sector. Most conspicuously, the company witnessed a 53% decline in net income, dropping from 4 billion CAD to 1.88 billion CAD in the second quarter of the year compared to the same period last year. Additionally, the revenue figure of 7.94 billion CAD fell short of the consensus estimate of 8.58 billion CAD.
However, despite these challenges, positive attention continues to gravitate towards SU stock, largely due to institutional traders’ activity.
Unusual Options Activity
At the close of the August 30 trading session, SU stock emerged as a prominent presence in Barchart’s unusual stock options volume screener. The total volume reached 268,430 contracts against an open interest of 374,107. Impressively, this translated to a remarkable 1,043.33% increase in volume compared to the trailing one-month average.
Digging into the transactional details, call options dominated with 266,076 contracts, while put options amounted to a mere 2,354 contracts. Consequently, the put/call volume ratio stood at 0.01, signaling a strongly bullish sentiment in its essence. Moreover, the put/call open interest ratio of 0.27 suggests longer-term optimism when taken in isolation.
However, a holistic understanding requires considering the actions of the real smart money–institutional players. Fintel’s options flow screener aids in identifying substantial block options trades typically executed by institutions.
In this context, the latest noteworthy institutional trade involves $32 calls set to expire on September 15, 2023. Fintel’s data indicates the purchase of 19,235 contracts, closely aligning with Barchart’s record of 21,245 contracts for the same option. Aligning the two data points indicates that institutional traders account for 90.54% of the demand driving the unusual options activity related to the $32 calls.
Upon examining the non-expired contracts comprehensively, both bullish and bearish activities are evident. However, optimistically aligned transactions outnumber their countervailing counterparts among major investors. Those considering an investment in SU stock can take solace in the fact that influential players are showing support.
Tune Out Distractions and Consider Suncor (for Speculators)
Admittedly, the condition of the consumer economy casts shadows over SU stock. For instance, the surpassing of the $1 trillion mark in Americans’ credit card debt sets a concerning record. This situation implies a conservative approach to spending, which might not be favorable for the hydrocarbon sector. Yet, for speculative investors, a compelling case could be made to join the SU stock trend.
The imminent return to standard workplace norms could spark apprehension, even as some resistant employees voice their concerns. However, history indicates that employers usually hold the upper hand as the ones who provide paychecks.
Consider the case of Farmers Group, an insurer. Earlier this year, the company’s new CEO reversed the prior administration’s remote work policy, mandating a three-day-a-week office presence for employees. While this pivot triggered discontent, Farmers recently announced a workforce reduction of 11%, amounting to approximately 2,400 employees.
It’s not a stretch to assume that some individuals on Farmers’ payroll now regret voicing their opinions. Similarly, when other companies issue return-to-work mandates, affected employees might recognize the reality.
In essence, these circumstances favor the oil business. For those willing to embrace the risk, SU stock could be an intriguing speculative investment.
Featured Image: Megapixl
Author Faith Yakubu 
