Back to top

Image: Bigstock

Can Crude Oil Touch the $100 Golden Mark? 3 Stocks to Gain

Read MoreHide Full Article

The WTI Crude price index has touched a seven-year high mark and is now heading for more gains. This is in stark contrast to the negative price levels in April last year, caused by coronavirus-induced demand destruction. It has been currently trading at more than $78 a barrel for the first time since 2014. The Brent Crude price also rose above the $82 per barrel mark.

OPEC+ Sticks to Plan

The oil-energy space has evolved significantly in the last few quarters. Despite several analysts and groups predicting an aggressive takeover of the energy spectrum by renewables, economies are gasping for more hydrocarbons at the moment due to low oil and gas supply as well as mounting demand, thanks to multiple vaccine rollouts around the world. Consumers were looking up to OPEC+ for higher-than-expected production increase. Instead, the group decided on sticking to 400,000 barrels a day increase for the month, which triggered the oil price hike. Also, there are looming fears in the energy market that OPEC members, except Saudi Arabia and the UAE, may not have enough capital to rapidly boost production as of now.

U.S. Producers Showing Restraint

Although crude oil prices are surging, U.S. domestic production did not witness a massive jump as before. Producers like Pioneer Natural Resources Company (PXD - Free Report) and Callon Petroleum Company (CPE - Free Report) showed discipline and held back from ramping up output. Instead, the companies focused on increasing cash from operations and deleveraging their balance sheet. Hurricane Ida wiping out a chunk of production from the market made things more difficult. Russia now has jumped to the second-largest oil supplier spot.

Gas-to-Oil Switch

Natural gas prices are also currently trading at a multi-year high, well beyond the $6 threshold. Rising consumption in Asia and Europe as well as a low supply of the commodity is keeping the price high. In fact, the rise in gas prices is so high that several markets in Asia are witnessing a gas-to-oil switch, stated Amin Nasser, the CEO of Saudi Aramco. This is further pushing oil and liquids demand higher. The supply crunch in China has added fuel to the fire. Further, an anticipated cold winter is raising concerns. The situation is even forcing some utilities to opt for coal, the commodity which is one of the biggest sources of greenhouse gas emissions.

All these market drivers can spread the energy crisis in Europe to other parts of the world. With no visible reason for demand growth to slow down, some analysts expect oil prices to inch toward the $100 per barrel mark, which reminds of the golden era of oil that was last witnessed in 2014. It is to be seen whether some major capital providers who moved away from hydrocarbons owing to environmental reasons change their decisions or not. Nevertheless, the favorable oil price scenario is definitely going to enhance some companies’ bottom line. Here’re three of them:

3 Key Picks

Royal Dutch Shell plc , based in Hague, Netherlands, is another European energy giant that is expected to make huge profits from the mounting energy demand in the continent. It foresees third-quarter 2021 upstream volumes of 2,100-2,250 thousand barrels of oil equivalent per day (Mboe/d) while integrated gas production is expected within 870-920 Mboe/d. It sports a Zacks Rank #1 (Strong Buy) and is expected to bring several facilities back online from their scheduled maintenance activities. This will enable the company to increase production from 2,262 Mboe/d reported in the second quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.

The stock has gained 14.2% in the past three months and is likely to increase further supported by strong LNG exports in Asian markets. The Zacks Consensus Estimate for 2021 bottom line is pegged at $5.10 per share, signaling a massive increase from the year-ago figure of $1.24.

Headquartered in Stavanger, Norway, Equinor ASA (EQNR - Free Report) is one of the premier integrated energy companies in the world. In Europe, the company is the second-largest supplier of natural gas and a leading seller of crude oil. Its major presence in the Norwegian Continental Shelf will likely help it to address the ongoing energy crisis in Europe. This Zacks Rank #1 company reaffirmed its production growth expectation at 2% for 2021, which, coupled with high commodity prices, will increase profits. It recently obtained permission from Norway to increase gas exports from two offshore fields amid shortage concerns of gas supplies in Europe.

The stock has risen 28.5% in the past three months and is expected to move higher on the back of surging energy demand. The Zacks Consensus Estimate for 2021 earnings is pegged at $3.09 per share, indicating a massive rise from the year-ago level of 27 cents. It has witnessed two upward estimate revisions in the past 30 days and no movement in the opposite direction.

Oklahoma City, OK-based Continental Resources, Inc. has a premier position in the Bakken region, which is ranked among the largest onshore oilfields of the United States. The company expects oil production for 2021 to average 160,000-165,000 barrels per day (Bbls/d). The mid-point of the range suggests an improvement from 160,505 Bbls/d of oil production recorded in 2020. It also increased natural gas production guidance to 900-1,000 million cubic feet per day (MMcf/d) from the previously mentioned 880-920 MMcf/d. The rising production level is expected to improve the company’s profitability.

The stock has jumped 35.6% in the past six months and there’s no indication of a slowdown. This Zacks Rank #1 player has witnessed two upward estimate revisions in the past 30 days and no movement in the opposite direction. The Zacks Consensus Estimate for 2021 earnings is pegged at $3.94 per share, indicating a significant improvement from the year-ago loss of $1.17.


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Pioneer Natural Resources Company (PXD) - free report >>

Callon Petroleum Company (CPE) - free report >>

Equinor ASA (EQNR) - free report >>

Published in