Energy demand has seen a significant rebound from the pandemic-driven lows as countries around the world have returned to full capacity. The supply imbalances and constraints that continue to plague the globe have led to multi-year highs in commodity prices. Oil prices have been no exception, with West Texas Intermediate (WTI) crude prices rising back over $100/barrel for the first time since 2014.
The Organization of Petroleum Exporting Countries (OPEC) recently cut its forecast for global oil demand this year, citing the Russia-Ukraine conflict as well as the resurgence of COVID-19 cases in China as the top threats to growth. World demand is set to rise by 3.67 million barrels per day (bpd) this year, down nearly half a million bpd from OPEC’s previous forecast. However, consumption is still expected to exceed the 100 million bpd mark later this year, which was last surpassed in 2019.
And while China’s Omicron outbreak dampened consumption in the first quarter, its oil demand is expected to rebound in the second quarter and show positive growth in May according to the China National Petroleum Corporation (CNPC). As long as COVID-19 cases remain under control, CNPC expects Chinese oil demand to climb to 15.26 million bpd in Q3 and rise to 15.37 million bpd in Q4 – up 4.1% and 6.7% year-over-year, respectively.
It’s no secret that oil-related stocks tend to have a high correlation with the price of crude oil. Higher oil prices are good news for oil company margins and profits. These instances of commodity price gains provide investors with opportunities. And with crude prices continuing to move higher, investors would be wise to consider an allocation to these stocks if they haven’t already done so.
After years of underperformance and underinvestment, last year was the first year in some time in which we saw the energy sector lead all sector returns. Much has been said and written in recent weeks about the Fed tightening and how it will bring down inflation, with energy prices coming down along with it. One thing we know for sure is that price trends tend to continue for longer than most people expect, and it wouldn’t be too shocking to see oil prices continue their rise in the short-term.
Quantitative research studies suggest that approximately half of a stock’s future price appreciation is due to its industry grouping. The Zacks Oil and Gas – Integrated – U.S. industry group is currently ranked in the top 3% out of approximately 250 industries. Because it is ranked in the top half of all industries, we expect it to outperform over the next three to six months. Also note the favorable characteristics for this group below:
This industry group has started out the year strong with a greater than 50% return, while the S&P is currently down more than 8%. The two oil and gas companies we will discuss below are part of this leading group and are both significantly outperforming the market. By focusing on stocks within the top Zacks Ranked Industries, we can dramatically improve our investing success.
Marathon Oil Corp. (MRO - Free Report)
Marathon Oil is a global, independent company that is engaged in the exploration, production, and marketing of crude oil and natural gas. MRO owns and operates 32 gathering and treatment facilities as well as a 42-mile natural gas pipeline known as the ‘Sugarloaf’ gathering system. Marathon Oil was founded in 1887 and is headquartered in Houston, TX.
A Zacks #1 (Strong Buy) stock, MRO has surpassed earnings estimates in each of the past seven quarters. The oil and gas producer most recently reported Q4 EPS back in February of $0.77, a +40% surprise over the $0.55 consensus estimate. Over the past four quarters, MRO has delivered an average earnings surprise of +37.39%. The stock has followed suit, advancing over 160% in the past year.
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Energy demand has seen a significant rebound from the pandemic-driven lows as countries around the world have returned to full capacity. The supply imbalances and constraints that continue to plague the globe have led to multi-year highs in commodity prices. Oil prices have been no exception, with West Texas Intermediate (WTI) crude prices rising back over $100/barrel for the first time since 2014.
The Organization of Petroleum Exporting Countries (OPEC) recently cut its forecast for global oil demand this year, citing the Russia-Ukraine conflict as well as the resurgence of COVID-19 cases in China as the top threats to growth. World demand is set to rise by 3.67 million barrels per day (bpd) this year, down nearly half a million bpd from OPEC’s previous forecast. However, consumption is still expected to exceed the 100 million bpd mark later this year, which was last surpassed in 2019.
And while China’s Omicron outbreak dampened consumption in the first quarter, its oil demand is expected to rebound in the second quarter and show positive growth in May according to the China National Petroleum Corporation (CNPC). As long as COVID-19 cases remain under control, CNPC expects Chinese oil demand to climb to 15.26 million bpd in Q3 and rise to 15.37 million bpd in Q4 – up 4.1% and 6.7% year-over-year, respectively.
It’s no secret that oil-related stocks tend to have a high correlation with the price of crude oil. Higher oil prices are good news for oil company margins and profits. These instances of commodity price gains provide investors with opportunities. And with crude prices continuing to move higher, investors would be wise to consider an allocation to these stocks if they haven’t already done so.
After years of underperformance and underinvestment, last year was the first year in some time in which we saw the energy sector lead all sector returns. Much has been said and written in recent weeks about the Fed tightening and how it will bring down inflation, with energy prices coming down along with it. One thing we know for sure is that price trends tend to continue for longer than most people expect, and it wouldn’t be too shocking to see oil prices continue their rise in the short-term.
Quantitative research studies suggest that approximately half of a stock’s future price appreciation is due to its industry grouping. The Zacks Oil and Gas – Integrated – U.S. industry group is currently ranked in the top 3% out of approximately 250 industries. Because it is ranked in the top half of all industries, we expect it to outperform over the next three to six months. Also note the favorable characteristics for this group below:
This industry group has started out the year strong with a greater than 50% return, while the S&P is currently down more than 8%. The two oil and gas companies we will discuss below are part of this leading group and are both significantly outperforming the market. By focusing on stocks within the top Zacks Ranked Industries, we can dramatically improve our investing success.
Marathon Oil Corp. (MRO - Free Report)
Marathon Oil is a global, independent company that is engaged in the exploration, production, and marketing of crude oil and natural gas. MRO owns and operates 32 gathering and treatment facilities as well as a 42-mile natural gas pipeline known as the ‘Sugarloaf’ gathering system. Marathon Oil was founded in 1887 and is headquartered in Houston, TX.
A Zacks #1 (Strong Buy) stock, MRO has surpassed earnings estimates in each of the past seven quarters. The oil and gas producer most recently reported Q4 EPS back in February of $0.77, a +40% surprise over the $0.55 consensus estimate. Over the past four quarters, MRO has delivered an average earnings surprise of +37.39%. The stock has followed suit, advancing over 160% in the past year.
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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