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OPEC, Russia Reject Trump Demand for Output Boost: 5 Picks

Swarup Gupta
This was a tough response to President Trump's recent tweet where he demanded that OPEC should immediately cut prices.

On Sep 23, Saudi Arabia and Russia said that they would not be raising crude output immediately. This was a tough response to President Trump’s recent tweet where he demanded that OPEC should immediately cut prices. The Saudi oil minister said that current supplies were adequate.

Also, Russia’s energy minister stressed that an immediate increase in output was unnecessary. Meanwhile, oil prices continued to trade higher on Monday. Impending U.S. sanctions on Iran and low inventories are the latest catalysts to an increase in prices. Investing in oil stocks looks lucrative at this time.

Saudi Arabia, Russia Rebuff Trump Tweet

On Sep 20, President Trump tweeted that the United States was providing security to the Middle East and that the region wouldn’t be safe without said protection. Accusing OPEC of boosting oil prices, he said that the oil cartel “must get prices down now!”

Speaking to journalists in Algiers on the sidelines of the OPEC meeting, Saudi oil minister Khalid al Falih denied Trump’s latest allegation. "I do not influence prices," said Falih. He said that member countries were providing enough ouput to negate the impact of the decline in supply from Iran, Venezuela and Mexico.

Falih added: “My information is that the markets are adequately supplied.” Meanwhile, Russia’s energy minister Alexander Novak said that an immediate increase in output was unnecessary. However, he agreed that U.S. sanctions on Iran and its trade war with China had led to new challenges for oil markets.

Iran Sanctions, Decline in Inventories Boost Prices

On Sep 24, oil prices increased by more than 2% to hit a four-year high, following OPEC’s refusal to raise output. Also, boosting prices were the impending U.S. sanctions on Iran, scheduled to begin at the start of November. JPMorgan JPM estimates that these measures could reduce global oil supplies by 1.5 million bpd.

Meanwhile, a recent report from the U.S. Energy Information Administration (EIA) reveals that U.S. commercial crude oil inventories fell 2.1 million barrels to 394.1 million for the week ended Sep 14. U.S. commercial crude oil inventories posted their fifth consecutive weekly fall and reached the lowest level since 2015. (Read: Oil Prices Touch 2-Month High: 5 Best Picks)

Our Choices

Comments from Saudi Arabia and Russia indicate that output increases from major oil producers are unlikely, despite President Trump’s demands. Prices are also trending higher as the U.S. prepares to impose a second round of sanctions on Iran.

A significant decline in U.S. crude inventories is also boosting prices. Investing in oil stocks looks like a smart option at this time. However, picking winning stocks may be difficult.

This is where our VGM Score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score. 

We have narrowed down our search to the following stocks based on a good Zacks Rank and VGM Score.

CNX Resources Corporation CNX is an independent oil and gas exploration and production company formed after the separation of CONSOL’s Exploration and Production (E&P) and Pennsylvania Mining Operations into two independent companies.

CNX Resources carries a Zacks Rank #1 and has a VGM Score of B. The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved by 16.1% over the last 30 days.

Solaris Oilfield Infrastructure, Inc. SOI manufactures and provides patented mobile proppant management systems which unload, store and deliver proppant at oil and natural gas well sites.

Solaris Oilfield has a VGM Score of B. The company has expected earnings growth of more than 100% for the current year.  The Zacks Consensus Estimate for the current year has improved by 0.7% over the last 30 days. The stock sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Denbury Resources Inc. DNR is a growing exploration and production (E&P) company engaged in the acquisition, development, operation, and exploration of oil and natural gas properties in the Gulf Coast and Rocky Mountain regions of the United States.

Denbury Resources has a Zacks Rank #2 (Buy) and VGM Score of A.  The company has expected earnings growth of more than 100% for the current year.  The Zacks Consensus Estimate for the current year has improved by 2.1% over the last 30 days.

Plains GP Holdings, L.P. PAGP is involved in the transportation, storage, terminalling, and marketing of crude oil and refined products.

Plains GP carries a Zacks Rank #2 and has a VGM Score of A. The company has expected earnings growth of 68.7% for the current year. The Zacks Consensus Estimate for the current year has improved by 4.9% over the last 30 days.

Oasis Midstream Partners LP OMP owns, develops, operates and acquires a diversified portfolio of midstream assets primarily in North America.

Oasis Midstream has a Zacks Rank #2 and VGM Score of B. The company has expected earnings growth of more than 100% for the current year.  The Zacks Consensus Estimate for the current year has improved by 1.8% over the last 30 days.

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JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
 
CNX Resources Corporation. (CNX) : Free Stock Analysis Report
 
Plains Group Holdings, L.P. (PAGP) : Free Stock Analysis Report
 
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Solaris Oilfield Infrastructure, Inc. (SOI) : Free Stock Analysis Report
 
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