The energy sector has long been suffering due to the weakness in crude prices. The commodity has been tumbling since mid-2014 owing to a supply glut in the face of lackluster demand. In such a scenario, most of the energy players saw their shares slipping to 52-week lows again and again. Adding to the woes, The Organization of the Petroleum Exporting Countries (OPEC) members along with U.S and Russia continued to increase oil production, which further worsened conditions and resulted in crude prices hitting the rock bottom.
However, the OPEC’s recent announcement is expected to turn the tide for the energy sector. This international cartel of oil producers which controls more than a third of the global oil supply, has decided to curb oil production for the first time in years. Also, oil inventory has been decreasing over the last four straight weeks, leading to oil price touching the highest mark in three weeks. Yesterday, West Texas Intermediate (WTI - Free Report) increased by more than 5% to reach $47.05 per barrel.
The OPEC Agrees to Cut Production
In a favorable turn of events for the energy sector, the OPEC has agreed to cut production the first time since 2008, owing to the prolonged crude prices weaknesses. In yesterday’s meeting at Algeria, the OPEC decided to cut its output to a range of 32.5–33 million barrels per day from August’s production level of 33.2 million barrels a day.
However, the limit of oil production for each country will be decided at next formal meeting in November. According to media sources, Iran, Libya and Nigeria will likely be permitted to increase production but Saudi Arabia is expected to lower output.
People with knowledge of the matter view the OPEC’s announcement as an end to the production war between the major oil producers in the world, where the OPEC is apparently the winner.
Decline in Crude Inventory
Along with OPEC’s plan to curb output, the decline in crude inventory also supported the gain in oil prices. The commodity market has witnessed a decline in the U.S oil inventories for the fourth consecutive week.
Energy Stocks Worth Considering
The increase in oil price is undoubtedly a boon for exploration companies since they will be able to sell the commodity at higher prices. In fact, the upstream energy players have been gaining significantly with the improvement in oil prices. In this article we have highlighted five exploration stocks that gained significantly in the last trading session.
Bill Barrett Corp. (BBG - Free Report) is an upstream energy company engaged in the exploration and production of oil and natural gas resources in the U.S. The Zacks Rank #2 (Buy) company gained almost 13% in the last trading session in the NYSE.
Whiting Petroleum Corp. (WLL - Free Report) is involved in exploration and production activities of oil and gas in the rocky Mountains and Permian Basin areas of the U.S. In the last trading session, the company gained almost 14% in the NYSE. Whiting Petroleum currently carries a Zacks Rank #3 (Hold).
Houston, TX-based Vanguard Natural Resources LLC (VNR - Free Report) is engaged in the development and acquisition of oil and gas resources in the U.S. The company gained almost 11% on Sep 29. Vanguard Natural currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here..
W&T Offshore Inc. (WTI - Free Report) , headquartered in Houston, TX, is an independent oil and gas firm involved in upstream operations like exploration and production of oil and gas assets in the Gulf of Mexico. The company gained more than 6% in the last trading session. The company currently carries a Zacks Rank #2.
Calgary, Canada-based Vermilion Energy Inc. (VET - Free Report) is an upstream player involved in exploration and production of oil resources in North America, Europe, and Australia. The company gained almost 6.2% and carries a Zacks Rank #2.
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