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Tap the Crude Oil Rally With These 4 Energy Stocks

Nilanjan Banerjee
·4 mins read

Oil energy stocks climbed higher after the European Union’s (EU) fiscal stimulus package raised optimism for the bloc to overcome the coronavirus pandemic’s economic fallout. Oil prices rallied to their highest level since early March, when the commodity was trading in the bearish territory following the pricing war between Russia and Saudi Arabia.

European Union Stimulus Deal

To safeguard EU economies that have been hit hard by the coronavirus pandemic, European leaders have decided to create a recovery fund of roughly €750 billion following five days of discussions.

The EU will tap the financial market to borrow the amount. Of the total recovery fund, €390 billion will be distributed to severely hit EU member states as grants. The remaining fund will be distributed as loans. The agreement also comprises a fresh budget of roughly €1.1 trillion for 2021 to 2027, thereby creating a combined spending package of €1.8 trillion.

Coronavirus Vaccine Hopes

There has been growing optimism surrounding the development of a coronavirus vaccine by 2020-end after three of the leading candidates in the world recently reported promising early trial data. The studies established that the three vaccine candidates have generated sufficient immune responses. Also, no serious side effects were reported by the participants through the study period, signifying that the vaccines were well tolerated and safe.

One of the three promising vaccine candidates is being developed by the Oxford University researchers and AstraZeneca PLC (AZN). The other two are experimental vaccines of German biotech firm BioNTech SE (BNTX) and U.S. drugmaker Pfizer Inc. (PFE); and China’s CanSino Biologics.

EU Deal & Vaccine Hopes Lift Oil

The news of EU stimulus deal and advancement of coronavirus studies have made investors more hopeful that fuel demand will improve following the gradual recovery of global economies. On Jul 21, the price of crude oil rallied to a four-month high, buoyed by the positive news.

The price of West Texas Intermediate (WTI) crude surged 3.3% to touch $42.17 per barrel mark, the highest since Mar 6. The price of Brent crude also surged 3.2% to $44.67 per barrel, the highest since early March.

Stocks Poised to Gain

The surge in oil price, recovering more than 230% since late-April, is supportive of upstream energy operations. Hence, it will be wise for investors to consider upstream energy stocks with oil contributing majorly to production volumes. We have shortlisted four stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cimarex Energy Co. XEC is among the leading energy firms with strong footprint in the Permian, the most prolific basin in the United States. The company, with oil contributing significantly to its total production volumes, has witnessed upward estimate revisions for 2020 bottom line in the past 30 days. Notably, the Zacks Rank #2 stock gained 10.9% on Jul 21 following the news of the EU stimulus deal.

Diamondback Energy, Inc. FANG, being engaged in exploiting and developing unconventional onshore oil reserves in the Permian, is also a leading energy player. The Zacks #2 Ranked company has also witnessed upward earnings estimate revisions for 2020 in the past 30 days. The stock gained 9.2% on the day.

Centennial Resource Development, Inc. CDEV also has a strong footprint in the Delaware Basin, a sub-basin of the Permian Basin. In the past 60 days, the oil producer with a Zacks Rank of 2 has seen upward estimate revisions for 2020 bottom line. The stock gained 12.5% on Jul 21.

Bonanza Creek Energy, Inc. BCEI is a leading oil producer in the domestic market. The #1 Ranked stock has seen upward earnings estimate revisions for 2020 in the past 30 days. The company also gained 8.3% on Jul 21.

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