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5 Crude Stocks That Outperformed the Commodity in August
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Oil prices rebounded in August after losing around 7% in July – the biggest monthly decline in two years. In fact, the last week of August saw U.S. oil benchmark settle above $70-a-barrel for the first time since Jul 20. The commodity was supported by a variety of catalysts, including the risk to Iranian supply, lower inventory overhang in the United States, a shock decline in Saudi Arabian production and continued freefall in Venezuelan output.
What’s encouraging is that the price appreciation brings back the upbeat tone in crude trade following the lull in July and early August. To be precise, the commodity rose about 3.1% in August to end the month at $69.80 per barrel.
Reasons for Oil's August Revival
Iran Sanctions: Most of the monthly price jump could be attributed to United States’ refusal to issue any waivers on cutting crude imports from Iran by Nov 4 when sanctions are introduced against the country’s petroleum sector. In June, President Trump withdrew from a nuclear deal with OPEC’s third-largest producer and subsequently imposed financial sanctions on the Islamic Republic. The November deadline has stoked worries about an expected cut in Tehran’s oil exports – currently at 2.1 million barrels a day – by around one million barrels and lead to a supply shortage in an already ‘tight’ oil market.
Sharp Inventory Drawdowns: Oil prices were also supported by a string of bullish reports from the Energy Department. Recent U.S. Energy Department's inventory releases that show multiple weeks of strong inventory draws in the domestic crude stockpiles – pointing to rising exports and strong refinery runs. Oil inventories have generally trended lower in a year and a half. In fact, stockpiles have shrunk in 48 of the last 72 weeks and are down nearly 55 million barrels in the past year.
Saudi Arabia’s Production Cut: The surprise fall in top exported Saudi Arabia’s July oil production contributed to the crude rally. Despite a prior pledge to hike output to neutralize supply shocks, Riyadh’s monthly production slipped to 10.29 barrels per day in July, 200,000 barrels per day lower than June. The de facto OPEC leader’s unexpected move was reportedly an attempt to prevent another glut and stop prices from falling from current levels.
Dwindling Venezuela Output: Fast-falling production in Venezuela have added to the jitters. With the country tethering on the verge of an economic collapse, oil output has dwindled by more than 40% since 2016. Venezuela currently churns out around 1.4 million barrels per day, the least since the 1950s and much lower that its pledge per the OPEC-led supply cuts. Restrictive financial sanctions imposed by the United States on the Maduro regime over the past year have further strangulated the Latin American nation’s struggling energy sector.
How to Identify the Outperformers?
The strong August rally does not necessarily indicate that all energy scrips would be wise picks. Moreover, with a wide range of energy firms thronging the investment space, it is by no means an easy task for investors to arrive at stocks that have the potential to deliver attractive returns. While it is impossible to be sure about such outperformers, this is where the Zacks Rank, which justifies a company’s strong fundamentals, can come in really handy.
The Zacks Rank is a reliable tool that helps you to trade with confidence regardless of your trading style and risk tolerance. To learn more about how you can use this proven system for market-beating gains, visit Zacks Rank Education.
Our Choices
Cactus, Inc. (WHD - Free Report) is an oilfield services provider, which designs, produces and sells a variety of specialized engineered wellhead and pressure control equipments to upstream energy firms. The stock currently has a Zacks Rank #1, while shares of Cactus have gained 4.2% in the past four weeks.
In the last 60 days, two earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has risen 14.6% in the same period.
Marathon Petroleum Corporation (MPC - Free Report) is a leading independent refiner, transporter and marketer of petroleum products. The stock currently has a Zacks Rank #2, while shares of Marathon Petroleum have gained 3.7% in the past four weeks.
In the last 60 days, six earnings estimates moved north, while three moved south for the current year. The Zacks Consensus Estimate for earnings has risen 7.4% in the same period.
Independence Contract Drilling, Inc. (ICD - Free Report) conducts oil and gas land drilling operations for exploration and production companies. The stock currently has a Zacks Rank #2, while shares of Independence Contract Drilling have gained 6.3% in the past four weeks.
In the last 60 days, two earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has risen 10.7% in the same period.
Denbury Resources Inc. is a company that explores for and produces oil and natural gas from properties in the Gulf Coast and Rocky Mountain regions of the United States. The stock currently has a Zacks Rank #2, while shares of Denbury Resources have gained 20.5% in the past four weeks.
In the last 60 days, three earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has risen 23.7% in the same period.
Premier Oil plc is an oil and gas exploration and production company with core operations in the UK North Sea, Southeast Asia, the Falkland Islands, and the Middle East. The stock currently has a Zacks Rank #2, while shares of Independence Contract Drilling have gained 3.9% in the past four weeks.
In the last 60 days, one earnings estimate moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has risen 24% in the same period.
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Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
5 Crude Stocks That Outperformed the Commodity in August
Oil prices rebounded in August after losing around 7% in July – the biggest monthly decline in two years. In fact, the last week of August saw U.S. oil benchmark settle above $70-a-barrel for the first time since Jul 20. The commodity was supported by a variety of catalysts, including the risk to Iranian supply, lower inventory overhang in the United States, a shock decline in Saudi Arabian production and continued freefall in Venezuelan output.
What’s encouraging is that the price appreciation brings back the upbeat tone in crude trade following the lull in July and early August. To be precise, the commodity rose about 3.1% in August to end the month at $69.80 per barrel.
Reasons for Oil's August Revival
Iran Sanctions: Most of the monthly price jump could be attributed to United States’ refusal to issue any waivers on cutting crude imports from Iran by Nov 4 when sanctions are introduced against the country’s petroleum sector. In June, President Trump withdrew from a nuclear deal with OPEC’s third-largest producer and subsequently imposed financial sanctions on the Islamic Republic. The November deadline has stoked worries about an expected cut in Tehran’s oil exports – currently at 2.1 million barrels a day – by around one million barrels and lead to a supply shortage in an already ‘tight’ oil market.
Sharp Inventory Drawdowns: Oil prices were also supported by a string of bullish reports from the Energy Department. Recent U.S. Energy Department's inventory releases that show multiple weeks of strong inventory draws in the domestic crude stockpiles – pointing to rising exports and strong refinery runs. Oil inventories have generally trended lower in a year and a half. In fact, stockpiles have shrunk in 48 of the last 72 weeks and are down nearly 55 million barrels in the past year.
Saudi Arabia’s Production Cut: The surprise fall in top exported Saudi Arabia’s July oil production contributed to the crude rally. Despite a prior pledge to hike output to neutralize supply shocks, Riyadh’s monthly production slipped to 10.29 barrels per day in July, 200,000 barrels per day lower than June. The de facto OPEC leader’s unexpected move was reportedly an attempt to prevent another glut and stop prices from falling from current levels.
Dwindling Venezuela Output: Fast-falling production in Venezuela have added to the jitters. With the country tethering on the verge of an economic collapse, oil output has dwindled by more than 40% since 2016. Venezuela currently churns out around 1.4 million barrels per day, the least since the 1950s and much lower that its pledge per the OPEC-led supply cuts. Restrictive financial sanctions imposed by the United States on the Maduro regime over the past year have further strangulated the Latin American nation’s struggling energy sector.
How to Identify the Outperformers?
The strong August rally does not necessarily indicate that all energy scrips would be wise picks. Moreover, with a wide range of energy firms thronging the investment space, it is by no means an easy task for investors to arrive at stocks that have the potential to deliver attractive returns. While it is impossible to be sure about such outperformers, this is where the Zacks Rank, which justifies a company’s strong fundamentals, can come in really handy.
To guide investors to the right picks, we highlight five stocks that carry a Zacks Rank of #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Rank is a reliable tool that helps you to trade with confidence regardless of your trading style and risk tolerance. To learn more about how you can use this proven system for market-beating gains, visit Zacks Rank Education.
Our Choices
Cactus, Inc. (WHD - Free Report) is an oilfield services provider, which designs, produces and sells a variety of specialized engineered wellhead and pressure control equipments to upstream energy firms. The stock currently has a Zacks Rank #1, while shares of Cactus have gained 4.2% in the past four weeks.
In the last 60 days, two earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has risen 14.6% in the same period.
Marathon Petroleum Corporation (MPC - Free Report) is a leading independent refiner, transporter and marketer of petroleum products. The stock currently has a Zacks Rank #2, while shares of Marathon Petroleum have gained 3.7% in the past four weeks.
In the last 60 days, six earnings estimates moved north, while three moved south for the current year. The Zacks Consensus Estimate for earnings has risen 7.4% in the same period.
Independence Contract Drilling, Inc. (ICD - Free Report) conducts oil and gas land drilling operations for exploration and production companies. The stock currently has a Zacks Rank #2, while shares of Independence Contract Drilling have gained 6.3% in the past four weeks.
In the last 60 days, two earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has risen 10.7% in the same period.
Denbury Resources Inc. is a company that explores for and produces oil and natural gas from properties in the Gulf Coast and Rocky Mountain regions of the United States. The stock currently has a Zacks Rank #2, while shares of Denbury Resources have gained 20.5% in the past four weeks.
In the last 60 days, three earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has risen 23.7% in the same period.
Premier Oil plc is an oil and gas exploration and production company with core operations in the UK North Sea, Southeast Asia, the Falkland Islands, and the Middle East. The stock currently has a Zacks Rank #2, while shares of Independence Contract Drilling have gained 3.9% in the past four weeks.
In the last 60 days, one earnings estimate moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has risen 24% in the same period.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>