Oil price is again walking on the bullish path and rose more than 20% from the early lows in August thanks to the possible freeze in crude output after the biggest oil producers gave indications of meeting next month. The market witnessed an uptrend in oil price over the last few trading days. We believe that this is high time for momentum traders to scoop up profits by buying oil stocks since the established uptrend will likely continue in the near term.
Crude Sees Bull Run Again
U.S. oil futures have been erratic in 2016 with prices recovering from a 12-year low of $26.21 a barrel in February to the $50/barrel mark in early June and then slipping again to under $40.
While factors like Canadian wildfires, Nigerian outages/disruptions, production issues in Venezuela and a strike by Kuwaiti oil workers contributed to the jump in prices earlier this year that saw the benchmark recover significantly, these issues have now vanished from the market. As of now, overproduction of crude and a glut of refined products keep the commodity under pressure.
At over 520 million barrels, current crude supplies are up 14% from the year-ago period and are at the highest level during this time of the year. As it is, improvement in oil fundamentals remain fragile with the existing stocks of refined product inventories – gasoline and distillate – remaining at their maximum seasonal levels in at least 20 years despite healthy demand. Piling on the misery is the Baker Hughes report, which revealed a steady rise in the U.S. oil rig count and pointed to a resurgence in shale drilling activities.
But over the past few trading days, West Texas Intermediate (WTI) crude futures have surged more than 20% to touch $48.22 per barrel on Aug 18, from a low settlement price of $39.50 on Aug 2. This is also the highest level since Jul 1. This bull-run came on renewed hopes of a production freeze from the 14-member OPEC bloc and Russia when they will meet next month in Algeria.
4 Energy Stocks Standing Out
For investors wanting to take advantage of the bullish oil landscape, we present four companies that deserve attention. Each of these has a favorable Zacks Rank #1 (Strong Buy) or #2 (Buy). These picks also have promising momentum metrics (Momentum Score = ’A’).
The Momentum Style Score indicates when the timing is favorable to enter a stock to take maximum advantage of the momentum. The momentum-effect is quite strong among Zacks Rank #1 and #2 stocks because as earnings estimate revisions rise, prices race ahead and future estimate revisions rise, resulting in even bigger gains.
Devon Energy Corporation DVN, based in Oklahoma City, is an independent energy company engaged primarily in the exploration, development and production of oil and natural gas. The company’s oil and gas operations are mainly concentrated on the onshore areas of North America, including the U.S. and Canada.
Over the past four quarters, the company with a Zacks Rank #1 posted an average positive earnings surprise of 44.08%. Moreover, over the past 30 days, the Zacks Consensus Estimate for the third quarter got revised to a loss of 1 cent which is a lot narrower than the prior estimate of a loss of 14 cents.
Headquartered in Dallas, TX, Matador Resources Company MTDR is an upstream energy player primarily involved in activities like exploration, development, production and acquisition of oil and natural gas assets in the U.S.
It is to be noted that this company, carrying a Zacks Rank #1, also posted a positive earnings surprise of 125.51% over the last four quarters.
Houston, TX-based EOG Resources Inc. EOG is a major independent oil and gas exploration and production company, with operations in the U.S., Canada, offshore Trinidad, the U.K., China, Canada and select other international areas.
Currently, the company carries a Zacks Rank #2. Over the last four quarters, EOG Resources reported an average positive earnings surprise of 37.98%. Moreover, over the last 30 days, the Zacks Consensus Estimate for the company’s third quarter got revised to a loss of 23 cents from the prior loss estimate of 36 cents.
Denver, CO-based SM Energy Company SM with a Zacks Rank #2 is an independent oil and gas company engaged in the exploration, exploitation, development, acquisition and production of natural gas and crude oil in North America.
Over the last 30 days, the Zacks Consensus Estimate for the company’s third quarter came at a loss of 60 cents, narrower than the prior estimate of a loss of 82 cents.
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BP PLC (BP): Free Stock Analysis Report
ROYAL DTCH SH-A (RDS.A): Free Stock Analysis Report
EXXON MOBIL CRP (XOM): Free Stock Analysis Report
DEVON ENERGY (DVN): Free Stock Analysis Report
SM ENERGY CO (SM): Free Stock Analysis Report
EOG RES INC (EOG): Free Stock Analysis Report
MATADOR RESOURC (MTDR): Free Stock Analysis Report
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