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Will OPEC Cut Production Deeper to Lift Coronavirus-Hit Oil?
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Members of OPEC are gearing up to meet in Vienna tomorrow, while ministers from Russia and other allied exporters will join the cartel on the following day. There is a high possibility that the crude exporting countries will decide on an emergency production cut as there has been substantial slowdown in global energy demand owing to the rapid spread of the novel coronavirus.
Outbreak Hits Global Energy Demand
The growing number of coronavirus cases across the world has rattled equity markets. Per the compiled data of Johns Hopkins University, since the virus was first detected in China late last year, the total number of infected people across the world has increased to 93,123. On the bright side, the compiled data suggests the recovery of 54% of the total infected people.
China, the epicenter of the virus, is the biggest importer of crude in the world. As a result, the epidemic has severely dented global energy demand, leading to more than a 23% decline in West Texas intermediate oil prices.
OPEC+ May Deepen Existing Production Cut
To combat the weakening of the oil business, a panel of OPEC and its allies, together OPEC+, has considered deepening the existing production cut at a technical meeting held on Mar 3. It has been recommended by a panel of OPEC+ that the oil exporters will consider cutting production by an additional 1 million barrels per day (Bbl/D).
There has been growing optimism that OPEC+ will consider further deepening in the output cut when they meet in Vienna since the existing agreement (in place since Jan 1) of curbing production by 2.1 million Bbl/D – comprising voluntary extra cuts by Saudi Arabia – has proved ineffective to shore up energy demand globally.
Stocks to Gain
Oil price might recover if the allied producers decide on an emergency crude production cut. Hence, with growing optimism over crude recovery, it would be worthwhile to keep an eye on explorers since the business of upstream players is positively correlated to the price of the commodity.
Callon Petroleum Co. has a premier position in the Permian Basin. The company now boasts an impressive footprint of 85,000 net acres in the region compared with 19,000 net acres in 2014.
Parsley Energy, Inc. , based in Midland, TX, is a pure-play Permian oil producer. The company currently owns roughly 258,000 net leasehold acres in the Permian Basin — 148,000 acres in the Midland Basin and 110,000 acres in the Delaware Basin.
With the divestment of its Eagle Ford resources, Pioneer Natural Resources Company (PXD - Free Report) has become a pure-play Permian stock. The company has significant drilling inventories in the nation’s most prolific basin which is likely to provide the company with decades of oil production.
Diamondback Energy, Inc. (FANG - Free Report) is a pure-play Permian player with presence across more than 350,000 net acres in the Permian. With more than 7,000 drilling locations in the basin, the company’s production outlook looks promising.
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This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
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Will OPEC Cut Production Deeper to Lift Coronavirus-Hit Oil?
Members of OPEC are gearing up to meet in Vienna tomorrow, while ministers from Russia and other allied exporters will join the cartel on the following day. There is a high possibility that the crude exporting countries will decide on an emergency production cut as there has been substantial slowdown in global energy demand owing to the rapid spread of the novel coronavirus.
Outbreak Hits Global Energy Demand
The growing number of coronavirus cases across the world has rattled equity markets. Per the compiled data of Johns Hopkins University, since the virus was first detected in China late last year, the total number of infected people across the world has increased to 93,123. On the bright side, the compiled data suggests the recovery of 54% of the total infected people.
China, the epicenter of the virus, is the biggest importer of crude in the world. As a result, the epidemic has severely dented global energy demand, leading to more than a 23% decline in West Texas intermediate oil prices.
OPEC+ May Deepen Existing Production Cut
To combat the weakening of the oil business, a panel of OPEC and its allies, together OPEC+, has considered deepening the existing production cut at a technical meeting held on Mar 3. It has been recommended by a panel of OPEC+ that the oil exporters will consider cutting production by an additional 1 million barrels per day (Bbl/D).
There has been growing optimism that OPEC+ will consider further deepening in the output cut when they meet in Vienna since the existing agreement (in place since Jan 1) of curbing production by 2.1 million Bbl/D – comprising voluntary extra cuts by Saudi Arabia – has proved ineffective to shore up energy demand globally.
Stocks to Gain
Oil price might recover if the allied producers decide on an emergency crude production cut. Hence, with growing optimism over crude recovery, it would be worthwhile to keep an eye on explorers since the business of upstream players is positively correlated to the price of the commodity.
We have shortlisted four oil stocks with strong presence in Permian — the most prolific basin in the United States. All the stocks currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Callon Petroleum Co. has a premier position in the Permian Basin. The company now boasts an impressive footprint of 85,000 net acres in the region compared with 19,000 net acres in 2014.
Parsley Energy, Inc. , based in Midland, TX, is a pure-play Permian oil producer. The company currently owns roughly 258,000 net leasehold acres in the Permian Basin — 148,000 acres in the Midland Basin and 110,000 acres in the Delaware Basin.
With the divestment of its Eagle Ford resources, Pioneer Natural Resources Company (PXD - Free Report) has become a pure-play Permian stock. The company has significant drilling inventories in the nation’s most prolific basin which is likely to provide the company with decades of oil production.
Diamondback Energy, Inc. (FANG - Free Report) is a pure-play Permian player with presence across more than 350,000 net acres in the Permian. With more than 7,000 drilling locations in the basin, the company’s production outlook looks promising.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>