The energy sector is stealing the show again, with oil gradually entering the bullish territory. The finalization of the crude production cut deal extension by OPEC and its allies has cheered energy investors since the commodity market is oversupplied. In fact, many analysts opine that if fuel demand continues to improve, since people are now returning to work, the crude market will turn supply deficit in 2021. This suggests the possibility of continuing crude price rally in the coming months.
Massive Rally in Crude Prices
The price of West Texas Intermediate (WTI) has touched $40-per-barrel mark and Brent crude is now approaching $45. In the past month, WTI oil surged 60%, while Brent crude jumped almost 45%. The agreement on Jun 6 between OPEC and its allies, known as OPEC+, to extend their record oil production cut through July has become one of the prime factors supporting the rally.
In April, OPEC+ decided to collectively curb production by 9.7 million barrels per day (Bbl/D) during May to June, an effort to recover coronavirus-hit oil prices. Notably, from July to December, the production cuts were due to taper off. However, until next month, the new accord has called for a daily collective cut of 9.6 million barrels.
Apart from the supply cut extension deal, the bullish oil market has also been supported by an upbeat American job report for the month of May – suggesting recovering fuel demand in the domestic market. Last month, employers added 2.5 million jobs, the maximum in a single month since 1948. Moreover, the unemployment rate declined to 13.3% from 14.7% in April.
Oil Producers to Regenerate Cashflow
The favorable crude pricing environment has brightened up prospects for energy players, especially oil explorers and producers. Notably, in the pre-market hours of Jun 8, oil stocks like QEP Resources Inc. QEP and Callon Petroleum Company CPE surged 48.9% and 38.7%, respectively.
Notably, in the last few months, energy players struggled to survive as the coronavirus pandemic dragged down global energy demand. To combat the pandemic, energy players cut dividend payments and curtailed capital spending. Occidental Petroleum OXY, the largest oil producer in the Permian Basin, drastically reduced dividend by 99%, since the company has cut dividend payments twice in 2020. Apache Corporation APA is another oil explorer that slashed dividend by 90%.
Now, the crude rally is likely to give upstream energy firms some respite so that they can regenerate cashflows and strengthen their financials.
Stocks to Gain
It seems to be an opportune moment for energy investors to consider oil stocks.Here, we present one stock carrying a Zacks Rank #2 (Buy) that is well positioned to gain. There are three other stocks with a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
QEP Resources, Inc., headquartered in Denver, CO, is a leading oil explorer and producer with operations spreading across the Permian Basin in Texas and the Williston Basin in North Dakota. The stock, with a Zacks Rank #2, has witnessed upward earnings estimate revisions for 2020 in the past 30 days.
Marathon Oil Corporation MRO, headquartered in Houston, TX, gained more than 20% in the pre-market hours of Jun 8. The oil producer, with operations in prolific shale plays like Permian, Eagle Ford and Bakken, currently carries a Zacks Rank #3 (Hold). The stock also witnessed upward estimate revisions for its 2020 bottom line in the past 30 days.
Occidental Petroleum Corporation, headquartered in Houston, TX,jumped 19% in pre-market hours. In the past 30 days, the oil producer, carrying a Zacks Rank #3,witnessed upward estimate revisions for its 2020 bottom line.
Continental Resources, Inc. CLR, based in Oklahoma City, OK, is a leading oil producer with operations in the Bakken play of North Dakota and Montana. The #3 Ranked stock gained more than 11% in the pre-market hour.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Marathon Oil Corporation (MRO) : Free Stock Analysis Report
Apache Corporation (APA) : Free Stock Analysis Report
QEP Resources, Inc. (QEP) : Free Stock Analysis Report
Occidental Petroleum Corporation (OXY) : Free Stock Analysis Report
Continental Resources, Inc. (CLR) : Free Stock Analysis Report
Callon Petroleum Company (CPE) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research