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The hottest commodity oil has been on a solid run this year thanks to a tightening oil market and rising global demand. Rounds of news about new supply disruption are adding strength to the oil price, making the case for energy stocks appealing.
Supply Declining
The looming Iran sanctions and falling Libya and Venezuela output were the biggest catalysts in driving oil price lately. The United States is expected to halt oil exports from the fifth-biggest producer Iran by November though some waivers can be granted while production in Libya has halved in five months to 527,000 barrels per day. Venezuela’s worsening economic crisis has forced the country to curtail its output to below 2 million barrels per day, which has been halved since 2005.
Now, the strike by hundreds of workers on Norwegian offshore oil and gas rigs has led to the shutdown of one shell-operated oilfield and escalated supply worries. A Canadian production outage at the 360,000-bpd Syncrude oil sands facility has reduced flows into Cushing, OK and is expected to continue doing so till September.
The Organization of the Petroleum Exporting Countries (OPEC) and other top crude producers, agreed to raise output by about 1 million barrels per day from July in order to offset global production losses in countries including Libya and Venezuela. However, the move will not be able to make up for higher demand thus pushing the price higher.
Demand Rising
Global demand for oil has been picking up buoyed by improving economic growth since the financial crisis and continued to be strong during the peak summer season.
However, demand from China may be curtailed by Trump’s tariff threats. President Donald Trump has threatened to levy new trade tariffs of 10% on $200 billion worth of Chinese goods, a move that will intensify trade tensions between the world’s two biggest economies.
Other Factors
Ongoing geopolitical tension in the Middle East is also supporting the oil price. Further, the oil futures market is in a state of backwardation, where later-dated contracts are cheaper than near-term contracts. This signals that the oil market is tightening and demand is robust, paving the way for an oil rally. This trend is likely to persist at least in the near term, acting as the biggest catalyst for the commodity.
Earnings Optimism
Per the latest Earnings Trends report, the energy sector remains the largest contributor to Q2 S&P 500 earnings, having projected more than double the growth from the year-ago level at 138.2%. In fact, full-year earnings are expected to grow 101.7%.
Given the barrage of bullish trends, energy stocks are set to explode higher heading into the Q2 earnings season. Below, we have presented five picks that could offer better returns than many others in the sector. This is because these stocks are supported by a strong Zacks Rank #1 (Strong Buy) or 2 (Buy), Momentum Score of A, a top Zacks Industry Rank, double-digit earnings growth for this year and a positive Zacks Earnings ESP for the yet-to-be reported quarter.
This is Canada's largest integrated petroleum company. Its operations, conducted under the Esso banner, are concentrated on exploration and production of oil and natural gas, refining and marketing petroleum products, and in the manufacture and sale of petrochemicals.
Zacks Rank: #2 Market Cap: $27.2 billion Industry Rank: Top 6% This Year Estimated Earnings Growth: 108.25% Earnings ESP: 5.56%
This is an international oil and gas exploration and production company with operations in the United States, Middle East and Latin America. Occidental is one of the largest U.S. oil and gas companies, based on equity market capitalization.
Zacks Rank: #1 Market Cap: $65.3 billion Industry Rank: Top 8% This Year Estimated Earnings Growth: 421.35% Earnings ESP: 4.61%
HollyFrontier Corporation
This is engaged in refining petroleum, and produces and markets gasoline, diesel, jet fuel, asphalt, heavy products and specialty lubricant products.
Zacks Rank: #1 Market Cap: $12.4 billion Industry Rank: Top 17% This Year Estimated Earnings Growth: 162.5% Earnings ESP: 3.24%
Anadarko Petroleum Corporation
This is one of the world's largest independent oil and gas exploration and production companies.
Zacks Rank: #2 Market Cap: $38.7 billion Industry Rank: Top 26% This Year Estimated Earnings Growth: 252.04% Earnings ESP: 20.77%
This is an independent exploration and production company with a strong, oil-weighted portfolio of global offshore and onshore assets with upside to the exploration program.
Zacks Rank: #1 Market Cap: $5.88 billion Industry Rank: Top 26% This Year Estimated Earnings Growth: 1384.62% Earnings ESP: 14.03%
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market. Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
5 Energy Stocks Set to Explode Higher
The hottest commodity oil has been on a solid run this year thanks to a tightening oil market and rising global demand. Rounds of news about new supply disruption are adding strength to the oil price, making the case for energy stocks appealing.
Supply Declining
The looming Iran sanctions and falling Libya and Venezuela output were the biggest catalysts in driving oil price lately. The United States is expected to halt oil exports from the fifth-biggest producer Iran by November though some waivers can be granted while production in Libya has halved in five months to 527,000 barrels per day. Venezuela’s worsening economic crisis has forced the country to curtail its output to below 2 million barrels per day, which has been halved since 2005.
Now, the strike by hundreds of workers on Norwegian offshore oil and gas rigs has led to the shutdown of one shell-operated oilfield and escalated supply worries. A Canadian production outage at the 360,000-bpd Syncrude oil sands facility has reduced flows into Cushing, OK and is expected to continue doing so till September.
The Organization of the Petroleum Exporting Countries (OPEC) and other top crude producers, agreed to raise output by about 1 million barrels per day from July in order to offset global production losses in countries including Libya and Venezuela. However, the move will not be able to make up for higher demand thus pushing the price higher.
Demand Rising
Global demand for oil has been picking up buoyed by improving economic growth since the financial crisis and continued to be strong during the peak summer season.
However, demand from China may be curtailed by Trump’s tariff threats. President Donald Trump has threatened to levy new trade tariffs of 10% on $200 billion worth of Chinese goods, a move that will intensify trade tensions between the world’s two biggest economies.
Other Factors
Ongoing geopolitical tension in the Middle East is also supporting the oil price. Further, the oil futures market is in a state of backwardation, where later-dated contracts are cheaper than near-term contracts. This signals that the oil market is tightening and demand is robust, paving the way for an oil rally. This trend is likely to persist at least in the near term, acting as the biggest catalyst for the commodity.
Earnings Optimism
Per the latest Earnings Trends report, the energy sector remains the largest contributor to Q2 S&P 500 earnings, having projected more than double the growth from the year-ago level at 138.2%. In fact, full-year earnings are expected to grow 101.7%.
Given the barrage of bullish trends, energy stocks are set to explode higher heading into the Q2 earnings season. Below, we have presented five picks that could offer better returns than many others in the sector. This is because these stocks are supported by a strong Zacks Rank #1 (Strong Buy) or 2 (Buy), Momentum Score of A, a top Zacks Industry Rank, double-digit earnings growth for this year and a positive Zacks Earnings ESP for the yet-to-be reported quarter.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Imperial Oil Limited (IMO - Free Report)
This is Canada's largest integrated petroleum company. Its operations, conducted under the Esso banner, are concentrated on exploration and production of oil and natural gas, refining and marketing petroleum products, and in the manufacture and sale of petrochemicals.
Zacks Rank: #2
Market Cap: $27.2 billion
Industry Rank: Top 6%
This Year Estimated Earnings Growth: 108.25%
Earnings ESP: 5.56%
Occidental Petroleum Corporation (OXY - Free Report)
This is an international oil and gas exploration and production company with operations in the United States, Middle East and Latin America. Occidental is one of the largest U.S. oil and gas companies, based on equity market capitalization.
Zacks Rank: #1
Market Cap: $65.3 billion
Industry Rank: Top 8%
This Year Estimated Earnings Growth: 421.35%
Earnings ESP: 4.61%
HollyFrontier Corporation
This is engaged in refining petroleum, and produces and markets gasoline, diesel, jet fuel, asphalt, heavy products and specialty lubricant products.
Zacks Rank: #1
Market Cap: $12.4 billion
Industry Rank: Top 17%
This Year Estimated Earnings Growth: 162.5%
Earnings ESP: 3.24%
Anadarko Petroleum Corporation
This is one of the world's largest independent oil and gas exploration and production companies.
Zacks Rank: #2
Market Cap: $38.7 billion
Industry Rank: Top 26%
This Year Estimated Earnings Growth: 252.04%
Earnings ESP: 20.77%
Murphy Oil Corporation (MUR - Free Report)
This is an independent exploration and production company with a strong, oil-weighted portfolio of global offshore and onshore assets with upside to the exploration program.
Zacks Rank: #1
Market Cap: $5.88 billion
Industry Rank: Top 26%
This Year Estimated Earnings Growth: 1384.62%
Earnings ESP: 14.03%
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market. Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>