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Oil Rides on a Tide of Bullish News, Settles Near $70

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U.S. oil prices recovered on Wednesday from the previous day’s more than five-month low after the Energy Information Administration ("EIA") said domestic crude inventories shrank more than 4 million barrels last week, significantly more than analysts' expectations. Also boosting oil prices, the Fed indicated that it would cut interest rates in 2024.

On the New York Mercantile Exchange, WTI crude futures gained 86 cents, or 1.3%, to close at $69.47 a barrel yesterday.

We believe that oil’s descent below $70 allows long-term-oriented market participants to buy shares in quality companies at attractive prices. Investors interested in the sector could benefit from having quality stocks like Murphy USA (MUSA - Free Report) , Matador Resources (MTDR - Free Report) and Liberty Energy (LBRT - Free Report) in their portfolio.

Let's dig deep into EIA’s Weekly Petroleum Status Report for the week ending Dec 8.

Analyzing the Latest EIA Report

Crude Oil: The federal government’s EIA report revealed that crude inventories fell 4.3 million barrels compared to expectations of a 2.7 million-barrel decrease per the analysts surveyed by S&P Global Commodity Insights. The higher-than-expected stockpile drop with the world’s biggest oil consumer was largely thanks to lower imports, which more than offset continued high domestic production, which at 13.1 million barrels per day, is near all-time highs.  

Total domestic stock now stands at 440.8 million barrels — 3.9% above the year-ago figure of 424.1 million barrels but 2% less than the five-year average.

However, on a slightly bearish note, the latest report showed that supplies at the Cushing terminal (the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange) gained 1.2 million barrels to 30.8 million barrels — the highest since August.

Meanwhile, the crude supply cover decreased from 28.2 days in the previous week to 27.6 days. In the year-ago period, the supply cover was 25.8 days.

Let’s turn to the products now.

Gasoline: Gasoline supplies increased for the fourth successive week. The 409,000-barrel rise was primarily attributable to higher production and imports even as demand strengthened. Analysts had forecast that gasoline inventories would gain 3.4 million barrels. At 224 million barrels, the current stock of the most widely used petroleum product is a mere 0.2% more than the year-earlier level, while it is 2% below the five-year average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) rose for the third time in as many weeks. The 1.5 million-barrel increase mainly reflected a jump in imports and strong production. Meanwhile, the market looked for a supply build of 1.6 million barrels. Following last week’s addition, current inventories — at 113.5 million barrels — are 5.6% below the year-ago level and 12% lower than the five-year average.

Refinery Rates: Refinery utilization, at 90.2%, dropped 0.3% from the prior week.

3 Energy Stocks to Buy

Having gone through the Weekly Petroleum Status Report, investors interested in the energy space might consider the operators mentioned below. Each of these companies currently carries a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank stocks here.

Murphy USA: Murphy USA beat the Zacks Consensus Estimate for earnings in two of the trailing four quarters and missed in the other two. It has a trailing four-quarter earnings surprise of 7%, on average.

Murphy USA is valued at around $7.6 billion. The company has seen its shares gain 28% in a year.

Matador Resources: MTDR beat the Zacks Consensus Estimate for earnings in each of the last four quarters. Matador Resources has a trailing four-quarter earnings surprise of 13.9%, on average.

MTDR is valued at around $6.4 billion. Matador Resources has seen its shares drop 9.6% in a year.

Liberty Energy: The 2023 Zacks Consensus Estimate for LBRT indicates 52.1% year-over-year earnings per share growth.

Liberty Energy is valued at around $3 billion. LBRT has seen its shares rise 12.9% in a year.

See More Zacks Research for These Tickers

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

Murphy USA Inc. (MUSA) - free report >>

Matador Resources Company (MTDR) - free report >>

Liberty Energy Inc. (LBRT) - free report >>

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