The most remarkable event that the energy market witnessed in September is the OPEC’s –The Organization of the Petroleum Exporting Countries – coming to consensus on oil production cut. Jaws dropped when major producers – who so long bickered for market share – suddenly agreed on an output curb, leaving behind the multiple bottoms that oil hit for so long. Had this initiative been taken earlier, the oil pricing carnage might have reversed long ago.
Moreover, the month of September witnessed an unexpected decline in crude inventory. Following all those events, West Texas Intermediate (WTI) crude futures surged 5.3% (or $2.38) to settle at $47.05 per barrel last week. This marked the highest level since the prior three weeks of September.
OPEC Decided to Curb Production
Following a six-hour gathering in the Algerian capital last week, members of OPEC decided to curtail crude output. Such a decision, aimed at addressing supply glut concerns, has been taken for the first time since 2008. OPEC officials have decided to form a committee to determine how much of production each country would have to cut. The report on the same will be presented in the group’s next meeting, to be held in November.
Most of the major oil producers in OPEC have been pumping oil close to the maximum capacity in recent times. They have been competing among themselves for buyers. Iran’s commitment to boost production was a major hindrance, especially, when Saudi Arabia refused to cut production unless Iran does the same.
Nevertheless, the officials took the unprecedented step, proposing to cut its collective output between 32.5 million barrels per day (bpd) and 33 million bpd, down from August’s 33.2 million bpd. The International Energy Agency had already stated that trimming production by 200,000 bpd to 33 million bpd will bring supply more in line with demand until the second half of next year. Another 700,000 bpd cut in production will help put an end to the glut by the end of this year.
Crude Inventories Slip
The federal government’s EIA – The Energy Information Administration – report revealed that crude inventories fell by 1.9 million barrels for the week ending Sep 23, 2016. The weekly decline paved the way for the commodity market to witness a decline in U.S oil inventories for the fourth consecutive week.
5 Star Energy Performers for September
Overall, we can say that September came as a blessing for energy players whose performances are directly linked with oil prices. In fact, after a long time, the prices of energy companies shot upon the stock exchange close on the heels of the surprise OPEC agreement. Hence, this is a good time to consider some flourishing energy stocks to add diversify to a portfolio.
Here we have employed our proprietary screening methodology to choose five energy stocks that witnessed a significant rise in prices in the four weeks of September. The stocks also carry a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Denver, CO-based Resolute Energy Corp. (REN - Snapshot Report) is an upstream energy player involved in activities like exploration, production and development of oil and gas properties in the U.S. During the month of September, the company surged more than 47% on the NYSE.
Resolute Energy currently carries a Zacks Rank #2, implying that it will outperform the broader U.S. equity market over the next one to three months. On top of that, for the current year, the company’s earnings are expected to improve more than 136%.
Lonestar Resources US Inc. (LONE - Snapshot Report) – based in Fort Worth, TX–is involved in operations like the development and production of unconventional properties in the U.S. In the four weeks of September, the company gained almost 43%.
The company currently carries a Zacks Rank #2 and posted an average positive earnings surprise of 55.17% in the last four quarters.
Ultra Petroleum Corp. (UPLMQ - Analyst Report) – headquartered in Houston, TX – is also involved in upstream activities like exploitation and development of oil and gas resources. The company carries a Zacks Rank #1, implying that it will significantly outperform the broader U.S. equity market over the next one to three months. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ultra Petroleum added almost 26% in September. Moreover, the company is anticipated to improve 148.4% in the current year.
Frisco, TX-based Comstock Resources Inc. (CRK - Analyst Report) is an independent oil and gas exploration and production company engaged in the acquisition, exploration, and development of oil and gas properties. Throughout September, the company gained 13%.
Currently, the company carries a Zacks Rank #2. Moreover, the company’s earnings for the current year are expected to improve 34.2%.
Headquartered in Calgary, Canada, Enbridge Inc. (ENB - Snapshot Report) is involved energy transportation and distribution activities. During the month of September, the company added almost 12%.
Currently, the company carries a Zacks Rank #2. Enbridge posted an average positive earnings surprise of 4.79% in the trailing four quarters.
Confidential: Zacks' Best Investment Ideas
Would you like to see a hand-picked "all-star" selection of investment ideas from the man who heads up Zacks' trading and investing services? Steve Reitmeister knows when key trades are about to be triggered and which of our experts has the hottest hand. Click for his selected trades right now >>