Oil prices rose for four consecutive trading days with international benchmark Brent crude closing at $62.59 per barrel on Sep 9, and the domestic West Texas Intermediate (WTI) settling at $57.85 per barrel.
Major oil producer, Saudi Arabia is promoting its influential Prince Abdulaziz bin Salman to the post of Energy Minister, decline in U.S. crude oil production and trade war truce are cited to be the primary reasons for this rally in oil prices.
As oil prices scale upward, investing in fundamentally sound energy players won’t be a bad proposition.
Factors Influencing Oil Price to Rise
Sep 9 seemed to be a good day for the oil market with several factors in domestic and international market propelling oil prices higher.
The Energy Information Administration (EIA) reported that U.S. crude oil production has been declining after reaching its peak in April at 12,123,000 barrels of oil per day (BOPD) production. There was a 33,000 BOPD decline in crude oil production in June. While the analysts assume that there will be an even larger decline in July.
Production dropped due to a fall in active drilling rig count. This is due to Hurricane Barry shutting down rigs in the Gulf of Mexico and the oil supply glut. In 2010, the shale revolution not only provided Americans with surplus cheap oil but also dealt a strong blow to the major oil producers in the world.
A surge in shale production has lowered oil prices forcing oil and gas companies to reduce drilling to cut down budget. The OPEC and OPEC+ (includes countries that do not fall in the OPEC cartel) have been slashing production since the end of 2017 to force the rise in oil price, but the United States administration is ready to sell oil at a lower price to become the dominator in the market.
Another event that boosted oil price was Saudi Arabia appointing a new oil minister right before the IPO of its pride possession, Saudi Aramco. Khalid al-Falih was replaced by Prince Abdulaziz bin Salman who will be the first member of the royal family to run the oil ministry. This news has helped oil prices gain traction and will boost the IPO of Aramco to reach the expected $3 trillion.
Oil prices further moved north after both the United States and China agreed to meet in October to resolve trade-related issues. Needless to say, that a predominant factor causing oil prices to drop heavily since 2018 is the trade war between the two largest economies in the world.
China is one of the largest importers of oil in the world. Since the rift in trade, China slashed its crude oil purchase from the United States and imposed additional 5% tariffs on crude oil imports on Sep 1, dampening the sentiments of U.S. oil manufacturers.
4 Stocks to Buy Right Now
It seems that the aforesaid factors will help oil prices to rise further, and with the United States trying to become the oil dominator, the future of the commodity is bright. We have shortlisted four stocks from the oil sector that flaunt a Zacks Rank #1(Strong Buy) or 2 (Buy).
Gran Tierra Energy Inc. (GTE - Free Report) is a publicly traded oil and gas exploration and production company. Gran Tierra’s expected earnings growth rate for the next quarter is 300%. The Zacks Consensus Estimate for current-year earnings has improved 55.6% over the past 60 days.
Gran Tierra carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
BP Midstream Partners LP (BPMP - Free Report) is a publicly traded company that owns, acquires, operates and develops pipelines and other midstream assets. The company’s expected earnings growth rate for the current year is 13.4%. The Zacks Consensus Estimate for current-year earnings has improved 3.6% over the past 60 days. BP Midstream carries a Zacks Rank #2.
OMV Aktiengesellschaft (OMVJF - Free Report) is a publicly traded integrated oil and gas company. The company’s expected earnings growth rate for the current year is 4.9%. The Zacks Consensus Estimate for current-year earnings has improved 15.9% over the past 60 days. OMV carries a Zacks Rank #2.
Pembina Pipeline Corporation (PBA - Free Report) is a publicly traded energy transportation and service provider. Pembina’s expected earnings growth rate for the current year is 14.1%. The Zacks Consensus Estimate for current-year earnings has improved 19.5% over the past 60 days. Pembina carries a Zacks Rank #2.
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