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Trade War Not a Big Threat to US Energy: 5 Top Oil Stocks
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Trump’s accusation that China had sought to obtain American technology through unfair means created quite an uproar, breaking out a trade war.
Many analysts opine that the U.S. energy market won’t be able to withstand the war blows for long since Beijing is now a key destination for massive volumes of American oil shipments. However, if China hits back with tariffs on U.S. oil and petroleum products, the losses for U.S. energy companies are likely to be limited, considering that more than 75% of petroleum consumed by the Americans come from the domestic market itself.
Sino-US Trade War Heats Up
With the recent threat from the Trump administration of 10% tariffs on additional $200 billion Chinese exports, the Sino-US trade war has intensified. The first salvo was fired on Jul 6 when the United States slapped 25% tariffs on $34 billion worth of Chinese goods. If the second round of tariffs kicks in, the export sector of China will face a severe blow.
China exports the largest share of its goods to the United Sates. If the Trump administration proceeds with imposing duties on more Chinese goods, almost 50% of U.S. imports from Beijing will be under duties, according to Rajiv Biswas of IHS Markit.
Tension Grips US Energy
China struck back last time by levying duties on equivalent value of goods from the United States. Beijing can now resort to the same tactic again by imposing tariffs on U.S. oil products if further duties are levied by the United States.
The export market of U.S. energy products heavily relies on China. In fact, China imported the second highest volumes of American crude after Canada through 2017, per the U.S. Energy Information Administration (EIA). China was also the third largest buyer of propane and liquefied natural gas from the United States, according to EIA data.
If China levies duties on U.S. petroleum products, there will be a pressing need for American explorers and integrated players to search for another prospective buyer which entails the loss of both time and money.
How to Cash in on the Situation?
In 2017, the United States consumed 19.9 million barrels (MMb/D) of petroleum a day. Out of the total volumes consumed, almost 77% — 15.3 MMb/D — was produced in the domestic market, significantly higher than 6.3 MMb/D exported last year, per EIA data.
Clearly, American players generate negligible revenues from exporting petroleum as compared to selling it in the U.S. market. Hence, if China — accounting for 7% of the total U.S. petroleum exports in 2017 — imposes tariffs on American oil, the domestic energy firms will have to bear limited losses keeping the booming domestic market in mind.
The yields of the Treasury notes and bonds rose after Jerome Powell testified in front of the Congress, reflecting strong investor confidence in the market. The chair of the Federal Reserve said that as compared to just 2% economic growth through the January-to-March quarter of 2018, the U.S. economy grew at a much faster pace in second-quarter 2018.
Which Stocks to Buy?
With the expectation that the booming domestic market will continue to favor U.S. energy firms, it might be a wise decision to invest in companies contributing to the oil and natural gas output in America. Also, since some U.S. shale plays — especially the Permian Basin — are facing pipeline bottleneck problems, it will be better to invest in companies operating in areas where the number of drilled but uncompleted wells (DUC) are declining.
Per EIA, in the Niobrara region, the number of DUC wells fell by 42 through the month of June. However, in the Permian, the DUC wells increased by 164 over the same time span.
Picking winning stocks with strong foothold in the Niobrara region may be a daunting task. This is where our VGM Score comes in handy. 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.
Headquartered in The Woodlands, TX, Anadarko Petroleum Corporation currently carries a Zacks Rank #2. We expect the firm, with a VGM Score of A, to record earnings growth of 255.6% and 24.2% in 2018 and 2019, respectively.
Noble Energy, Inc. , headquartered in Houston, TX, also carries a Zacks Rank #2 and a VGM Score of A. The firm will likely post earnings growth of 280.6% and 48.7% in 2018 and 2019, respectively.
Headquartered in Houston, TX, EOG Resources, Inc. (EOG - Free Report) sports a Zacks Rank #1 and a VGM Score of B. The firm will likely witness earnings growth of 368.8% and 23.3% in 2018 and 2019, respectively.
Devon Energy Corporation (DVN - Free Report) , headquartered in Oklahoma City, OK, carries a Zacks Rank #2. For 2018 and 2019, we expect the firm to record earnings growth of 173% and 80.5%, respectively. The stock holds a VGM Score of B.
Headquartered in Denver, CO, Whiting Petroleum Corporation has a VGM Score of B. For 2018 and 2019, we expect the Zacks #1 Ranked firm to post earnings growth of 322.9% and 24.6%, respectively.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
Image: Bigstock
Trade War Not a Big Threat to US Energy: 5 Top Oil Stocks
Trump’s accusation that China had sought to obtain American technology through unfair means created quite an uproar, breaking out a trade war.
Many analysts opine that the U.S. energy market won’t be able to withstand the war blows for long since Beijing is now a key destination for massive volumes of American oil shipments. However, if China hits back with tariffs on U.S. oil and petroleum products, the losses for U.S. energy companies are likely to be limited, considering that more than 75% of petroleum consumed by the Americans come from the domestic market itself.
Sino-US Trade War Heats Up
With the recent threat from the Trump administration of 10% tariffs on additional $200 billion Chinese exports, the Sino-US trade war has intensified. The first salvo was fired on Jul 6 when the United States slapped 25% tariffs on $34 billion worth of Chinese goods. If the second round of tariffs kicks in, the export sector of China will face a severe blow.
China exports the largest share of its goods to the United Sates. If the Trump administration proceeds with imposing duties on more Chinese goods, almost 50% of U.S. imports from Beijing will be under duties, according to Rajiv Biswas of IHS Markit.
Tension Grips US Energy
China struck back last time by levying duties on equivalent value of goods from the United States. Beijing can now resort to the same tactic again by imposing tariffs on U.S. oil products if further duties are levied by the United States.
The export market of U.S. energy products heavily relies on China. In fact, China imported the second highest volumes of American crude after Canada through 2017, per the U.S. Energy Information Administration (EIA). China was also the third largest buyer of propane and liquefied natural gas from the United States, according to EIA data.
If China levies duties on U.S. petroleum products, there will be a pressing need for American explorers and integrated players to search for another prospective buyer which entails the loss of both time and money.
How to Cash in on the Situation?
In 2017, the United States consumed 19.9 million barrels (MMb/D) of petroleum a day. Out of the total volumes consumed, almost 77% — 15.3 MMb/D — was produced in the domestic market, significantly higher than 6.3 MMb/D exported last year, per EIA data.
Clearly, American players generate negligible revenues from exporting petroleum as compared to selling it in the U.S. market. Hence, if China — accounting for 7% of the total U.S. petroleum exports in 2017 — imposes tariffs on American oil, the domestic energy firms will have to bear limited losses keeping the booming domestic market in mind.
The yields of the Treasury notes and bonds rose after Jerome Powell testified in front of the Congress, reflecting strong investor confidence in the market. The chair of the Federal Reserve said that as compared to just 2% economic growth through the January-to-March quarter of 2018, the U.S. economy grew at a much faster pace in second-quarter 2018.
Which Stocks to Buy?
With the expectation that the booming domestic market will continue to favor U.S. energy firms, it might be a wise decision to invest in companies contributing to the oil and natural gas output in America. Also, since some U.S. shale plays — especially the Permian Basin — are facing pipeline bottleneck problems, it will be better to invest in companies operating in areas where the number of drilled but uncompleted wells (DUC) are declining.
Per EIA, in the Niobrara region, the number of DUC wells fell by 42 through the month of June. However, in the Permian, the DUC wells increased by 164 over the same time span.
Picking winning stocks with strong foothold in the Niobrara region may be a daunting task. This is where our VGM Score comes in handy. 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 solid VGM Score and Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Headquartered in The Woodlands, TX, Anadarko Petroleum Corporation currently carries a Zacks Rank #2. We expect the firm, with a VGM Score of A, to record earnings growth of 255.6% and 24.2% in 2018 and 2019, respectively.
Noble Energy, Inc. , headquartered in Houston, TX, also carries a Zacks Rank #2 and a VGM Score of A. The firm will likely post earnings growth of 280.6% and 48.7% in 2018 and 2019, respectively.
Headquartered in Houston, TX, EOG Resources, Inc. (EOG - Free Report) sports a Zacks Rank #1 and a VGM Score of B. The firm will likely witness earnings growth of 368.8% and 23.3% in 2018 and 2019, respectively.
Devon Energy Corporation (DVN - Free Report) , headquartered in Oklahoma City, OK, carries a Zacks Rank #2. For 2018 and 2019, we expect the firm to record earnings growth of 173% and 80.5%, respectively. The stock holds a VGM Score of B.
Headquartered in Denver, CO, Whiting Petroleum Corporation has a VGM Score of B. For 2018 and 2019, we expect the Zacks #1 Ranked firm to post earnings growth of 322.9% and 24.6%, respectively.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>