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EU Stimulus, Vaccine Hopes Aid Oil Price, Upstream Stocks Rise
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Finally, crude prices hit more than four-month high yesterday as the global outlook for demand seems bullish at the moment. The European Union leaders struck a stimulus deal yesterday, which led to the uptick. Moreover, positive coronavirus vaccine data supported bullish market sentiments.
Crude Price Movement
Brent Crude price rose to more than $44 per barrel mark from around $19 on Apr 21. Also, the U.S. benchmark, WTI Crude crossed the $42 per barrel mark, which is the highest since Mar 6. These significant gains in crude prices are expected to provide a profit-boosting opportunity for exploration and production companies.
Hopefully, if the gains sustain, upstream energy companies will likely witness sequential improvement in the bottom line in the third quarter. To understand whether the upward thrust is sustainable, we have to delve deeper into the factors that are pushing oil prices.
EU Stimulus Deal
The European Union leaders agreed on a €750-billion (around $860 billion) recovery fund, following almost five-day talks in Nice, France. The tweet from Charles Michel, European Council president, “We did it! We have reached a deal on the recovery package and the European budget for 2021-2027” underscores the deal’s importance. The fund incorporates a total of €390 billion non-repayable grants to the countries hit hardest by the pandemic and a €360-billion low-interest loan.
The agreement comes on top of individual government stimulus packages that were announced after the pandemic struck Europe. In addition, Euro zone finance ministers approved a €540-billion short-term fiscal stimulus package last April.
The latest deal is expected to boost the EU economies, which will likely enhance energy demand. With OPEC+ following through the curtailed production plan, U.S. upstream companies will likely gain from this expected rise in oil demand. In fact, following the positive news that boosted oil prices, upstream companies like Matador Resources Company (MTDR - Free Report) , Centennial Resource Development, Inc. , SM Energy Company (SM - Free Report) , Cimarex Energy Co. and others recorded double-digit gains in stock prices.
U.S. Package to Follow?
The extended unemployment aid in the United States is set to expire this month. As such, lawmakers are expected to agree on a new stimulus package that will provide support to struggling small businesses, and aid American families as well as schools. This move will likely give a push to the domestic economy, further boosting energy demand.
COVID-19 Vaccine Hopes
The oil price rise also received support from encouraging coronavirus vaccine data released this Monday by Oxford University and AstraZeneca PLC (AZN - Free Report) . The vaccine candidate yielded a dual response in volunteers aged between 18 and 55 years. While several companies are racing to develop a successful vaccine against the virus, U.S. biotech firm Moderna, Inc. (MRNA - Free Report) and a Chinese candidate have recorded favorable results.
Easing coronavirus-induced lockdowns and the gradual lifting of travel bans are expected to further increase energy demand. The demand hike, which will increase oil prices, is likely to sustain. On top of the economic stimulus, vaccine hopes are expected to improve the global economic outlook.
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EU Stimulus, Vaccine Hopes Aid Oil Price, Upstream Stocks Rise
Finally, crude prices hit more than four-month high yesterday as the global outlook for demand seems bullish at the moment. The European Union leaders struck a stimulus deal yesterday, which led to the uptick. Moreover, positive coronavirus vaccine data supported bullish market sentiments.
Crude Price Movement
Brent Crude price rose to more than $44 per barrel mark from around $19 on Apr 21. Also, the U.S. benchmark, WTI Crude crossed the $42 per barrel mark, which is the highest since Mar 6. These significant gains in crude prices are expected to provide a profit-boosting opportunity for exploration and production companies.
Hopefully, if the gains sustain, upstream energy companies will likely witness sequential improvement in the bottom line in the third quarter. To understand whether the upward thrust is sustainable, we have to delve deeper into the factors that are pushing oil prices.
EU Stimulus Deal
The European Union leaders agreed on a €750-billion (around $860 billion) recovery fund, following almost five-day talks in Nice, France. The tweet from Charles Michel, European Council president, “We did it! We have reached a deal on the recovery package and the European budget for 2021-2027” underscores the deal’s importance. The fund incorporates a total of €390 billion non-repayable grants to the countries hit hardest by the pandemic and a €360-billion low-interest loan.
The agreement comes on top of individual government stimulus packages that were announced after the pandemic struck Europe. In addition, Euro zone finance ministers approved a €540-billion short-term fiscal stimulus package last April.
The latest deal is expected to boost the EU economies, which will likely enhance energy demand. With OPEC+ following through the curtailed production plan, U.S. upstream companies will likely gain from this expected rise in oil demand. In fact, following the positive news that boosted oil prices, upstream companies like Matador Resources Company (MTDR - Free Report) , Centennial Resource Development, Inc. , SM Energy Company (SM - Free Report) , Cimarex Energy Co. and others recorded double-digit gains in stock prices.
U.S. Package to Follow?
The extended unemployment aid in the United States is set to expire this month. As such, lawmakers are expected to agree on a new stimulus package that will provide support to struggling small businesses, and aid American families as well as schools. This move will likely give a push to the domestic economy, further boosting energy demand.
COVID-19 Vaccine Hopes
The oil price rise also received support from encouraging coronavirus vaccine data released this Monday by Oxford University and AstraZeneca PLC (AZN - Free Report) . The vaccine candidate yielded a dual response in volunteers aged between 18 and 55 years. While several companies are racing to develop a successful vaccine against the virus, U.S. biotech firm Moderna, Inc. (MRNA - Free Report) and a Chinese candidate have recorded favorable results.
Easing coronavirus-induced lockdowns and the gradual lifting of travel bans are expected to further increase energy demand. The demand hike, which will increase oil prices, is likely to sustain. On top of the economic stimulus, vaccine hopes are expected to improve the global economic outlook.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.1% per year.
These 7 were selected because of their superior potential for immediate breakout.
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