4 Oil Stocks to Spike as Crude Hits 5-Week High
Even a few days ago several analysts were of the opinion that OPEC’s attempt to recover oil prices by reducing output failed due to the resurgence in production by U.S shale players. After a small period of recovery, following the cartel’s deal in last November, oil prices dramatically slipped again to the below $50 per barrel mark. With no near-term growth drivers in sight, the possibility of an improvement in commodity price seemed over.
Then came the news of U.S missile attack on Syria and shut down of the Libya’s largest oil field. On top of that, Russia is holding talks to extend the output cut accord. Following these developments, crude has started to advance toward the $55 per barrel level.
Oil Price Touched 5-Week High
West Texas Intermediate (WTI) crude reached a five-week high of $53.23 per barrel, before settling at $53.08 per barrel. This raises optimism about oil crossing the $55 per barrel physiological level again.
What is Driving Oil Prices?
Shutdown of Sharara oilfield
On Apr 9, 2017, the Sharara oilfield of Libya was shut down after a pipeline carrying crude to the export terminal was blocked by a group. This is the second such shutdown in quick succession. Following a week-long outage ending in early April, the field had just restarted operations.
Libya, a member of OPEC, was exempted from the cartel’s production cut agreement, which was inked last November. Before the disruption, the oil field was pumping oil out of the ground at a rate of 200,000 barrels every day. Going by the past incidents, we can see that technical faults and political disturbances have resulted in the repeated opening and closing of the Libyan oilfields.
Missile Attack on Syria
The news of the Sharara oilfield shutting down came just after the U.S. launched a cruise missile attack at a Syrian airbase following the military of Syria attacking its civilians with chemical weapons.
Although Syria contributes minimal crude volume, analysts believe that any geopolitical tensions in the Middle East could boast oil prices. Investors should know that Middle East is responsible for more than 25% of crude output in the world.
Russia Likely to Extend Output Cut Deal
Also, Russia is willing to extend output cut accord and is currently holding discussions regarding the matter. Alexander Novak, the Russian energy minister, said that the country is negotiating the need of extending the production curb accord with OPEC.
4 Prominent Picks
The improving crude pricing scenario is definitely good for oil exploration and production companies as they can now sell the commodities at much higher prices. However, picking the upstream energy stocks from the stock universe can be a daunting task. To simplify the task we have selected stocks using our proprietary stock screener.
Here we have picked stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy). Moreover, these stocks either have a strong earnings surprise history or have displayed solid year-over-year earnings growth.
Headquartered in Houston, TX, Cobalt International Energy Inc. CIE is an exploration and production company that operates mainly in the deepwaters of the Gulf of Mexico.
The company carries a Zacks Rank #2. For 2017, Cobalt is expected to witness year-over-year earnings growth of 78.06%.
Concho Resources Inc. CXO, headquartered in Midland, TX, is also involved in exploration and development of oil and gas resources in the U.S.
The upstream energy player carries a Zacks Rank #2 and had an average positive earnings surprise of 310.74% in the prior three quarters.
Headquartered in Denver, CO, Antero Resources Corp. AR is involved in activities like exploitation and development of oil and gas resources in the U.S.
Antero Resources beat the Zacks Consensus Estimate of earnings in each of the prior four quarters with an average positive surprise of 239.10%. The company currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
PDC Energy Inc. PDCE, headquartered in Denver, CO, explores and produces oil in the U.S. Currently, the company holds a Zacks Rank #2.
In 2017, we expect the company to post earnings growth of 179.76%.
Encouraging Price Performances
All the stocks showed encouraging price performances and outperformed the Zacks categorized Oil & Gas-U.S Exploration & Production industry month to date. During the aforesaid period the broader industry registered an increase 0.5%, while shares of Antero Resources, Concho Resources, Cobalt International and PDC Energy increased 2.8%, 2.3%, 8.8% and 2.5%, respectively.
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Cobalt International Energy, Inc. (CIE): Free Stock Analysis Report
Concho Resources Inc. (CXO): Free Stock Analysis Report
PDC Energy, Inc. (PDCE): Free Stock Analysis Report
Antero Resources Corporation (AR): Free Stock Analysis Report
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