Is the oil crisis really over? This billion-dollar question is now in the mind of every skeptical investor. Some say in favor and some believe that oil might fall again in the near term. But if we see the price trend over the last few months we can say that the commodity is definitely walking on the bullish path, bouncing off its multi-years lows.
We believe that the time has come to choose energy stocks that have solid financials along with a chance to grow significantly in the near future banking on the crude rally. Oil Jumped The West Texas Intermediate (WTI) crude fell to a 12-year low mark of $26.21 per barrel during mid-February this year. From there, this commodity settled at $50.36 each barrel yesterday, reflecting a whopping jump of as high as over 90%. In fact, this is the first time since Jul 2015 that WTI crude has crossed the $50 benchmark. Most importantly, crude has been dictating the overall movement of the market. With the massive crude hike, the market also surged. The Dow Jones Industrial Average (DJI) and the Standard & Poor’s 500 (S&P 500) improved significantly from the Feb 11 level – the day when the Dow plummeted to its lowest level since Feb 6, 2014 and the S&P 500 fell to its lowest level since Apr 11, 2014. Since then, the Dow and the S&P 500 have improved 14.6% and 15.5%, respectively. Why Crude Surged? The rally in oil prices in the last two trading sessions came mainly due to supply disruptions from Nigeria and Canada. Militants in the Niger Delta region pledged to curtail crude production in Nigeria. Incidentally, Nigeria is one of Africa’s top oil producing nations with an output of almost two million barrels per day. Moreover, in Canada, the Alberta region has been ravaged by a wildfire for two weeks that has threatened the major oil sands’ production facilities. However, Canadian producers like Suncor Energy Inc. ( SU Quick Quote SU - Free Report) are now ramping up their operations. The other drivers of the crude rally are a weak U.S. dollar and the fact that the upstream players have been relentlessly reducing their spending on drilling operations. In fact, mainly owing to this spending cut the oil output in U.S decreased by 250,000 barrels per day in May from April. Notably, this slippage in one month is the largest in years as per the Energy Information Administration – which provides official energy statistics from the U.S. government. Who Will Gain? It seems that the oil crisis is almost over after a prolonged weakness in the commodity. Definitely, this is good news for the debt-laden upstream players as they can now sell the commodity at much higher prices compared to the prior months. With more probability for exploration and production, there will be more business for the oil pipeline and storage players too. Given this upbeat picture, it will be wise to include energy players with solid fundamentals and financial strength to one’s portfolio. And there will be nothing like it if these energy stocks showcase significant growth potential. With the help of our new style score system, we have identified five stocks that look great from the growth standpoint. These stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy). It has been noted that stocks with a favorable growth score along with a top Zacks Rank consistently earn superior returns. Enbridge Inc. ( ENB Quick Quote ENB - Free Report) : Calgary, Canada-located Enbridge is an energy transportation and distribution firm with operations mainly in the U.S and Canada. The company has a Zacks Rank #1 and a Growth score of ‘A’. EXCO Resources Inc. : The Dallas, TX-based company is primarily involved in the exploitation, production and development of oil and natural gas resources in the U.S. EXCO mainly focuses on shale plays. The upstream firm is braced with a Growth Score of ‘A’ and a Zacks Rank #2. Baytex Energy Corp. : The Calgary, Canada-based firm is also involved in exploration, development and acquisition of oil and gas properties primarily in the U.S. and the Western Sedimentary Basin in Canada. The company has a Growth score of ‘B’ and a Zacks Rank #2. World Point Terminals LP : The partnership has ownership interest in storage terminals used for storing oil and refined petroleum products in the East Coast, Gulf Coast, and the Midwest areas of the U.S. The partnership sports a Zacks Rank #1 and has a Growth score of ‘B’. Tallgrass Energy GP LP : The partnership is a contributor of crude transportation services in the Wyoming and the adjoining areas of U.S. The partnership is braced with a Growth score of ‘B’ and Zacks Rank #1. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>