Following the release of EIA crude inventory numbers and Fed announcement on interest rates, oil prices jumped above the psychologically important $45 per barrel level on Wednesday. West Texas Intermediate crude for Nov delivery gained $1.29, or 2.9%, to settle at $45.34 a barrel in electronic trading yesterday.
The U.S. Energy Department's weekly inventory release showed that crude stockpiles recorded a surprise drop. As per the federal government’s EIA report, oil inventories decreased by a massive 6.2 million barrels for the week ending Sep 16, 2016.
The analysts surveyed by S&P Global Platts – the leading independent commodities and energy data provider – had expected crude stocks to go up some 2.8 million barrels. A relatively strong refining activity for this time of year led to the big stockpile drawdown with the world's biggest oil consumer.
Following the third consecutive unexpected weekly inventory decline, the current supplies – at 504.6 million barrels – are at their lowest level in 7 months.
Apart from the bullish government data, oil prices were also supported by the decision by Federal Reserve not to raise interest rates. As widely expected, the U.S. central bank opted to leave the current 0.25-0.50 rate unchanged. This led to dollar weakness that made the greenback-priced crude more affordable for investors holding foreign currency.
Supportive for Stocks
Yesterday, ‘The Energy Select Sector SPDR’ posted a jump of 2.32%, outperforming the broad-based Dow Jones Industrial Average and the S&P 500 index, which gained just 0.90% and 1.09%, respectively. All major oil stocks – including mega-caps Exxon Mobil Corp. (XOM - Analyst Report) , Chevron Corp. (CVX - Analyst Report) and ConocoPhillips (COP - Analyst Report) – relocated in the green with gains of 0.92%, 1.98% and 2.69%, respectively.
A Rare Opportunity to Build a Position in Energy
There are investors who see oil’s Wednesday’s rally as just the calm before the storm and decide to build or increase their position in oil-related companies. However, selecting stocks to buy could be a tricky proposition, especially with oil prices moving like a roller-coaster.
However, with the help of our proprietary quantitative model, one can locate stocks with green shoots. In particular, we have shortlisted 4 companies that have gone up an impressive 4% or more yesterday, and have a Zacks Rank of #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
4 Stocks to Invest In
Carrizo Oil & Gas Inc. (CRZO - Snapshot Report) : Carrizo Oil & Gas, headquartered in Houston, TX is an independent energy explorer with operations in the Eagle Ford and Delaware Permian, and additional properties in the Niobrara, Marcellus, and Utica.
Zacks Rank: #1
% Price Change (Yesterday): +4.52%
Vermilion Energy Inc. (VET - Snapshot Report) : A Canada-based international oil and gas producer, Vermilion Energy boasts of leading positions in Europe, North America and Australia.
Zacks Rank: #2
% Price Change (Yesterday): +5.26%
Helix Energy Solutions Group Inc. (HLX - Snapshot Report) : Houston, TX-based Helix Energy offers marine contracting services, apart from operating offshore oil/gas properties and production units.
Zacks Rank: #2
% Price Change (Yesterday): +5.44%
Lonestar Resources US Inc. (LONE - Snapshot Report) : Headquartered in Fort Worth, TX, Lonestar is an oil and gas exploration and production company with primary focus on the Eagle Ford Shale in South Texas.
Zacks Rank: #2
% Price Change (Yesterday): +5.50%
While these stocks may not be breaking out to new highs, they certainly hold the potential to make investors standout gains even in these capricious times.
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