On Sep 19, domestic crude inventories fell to a three and a half year low, which in turn boosted WTI oil prices to touch a two-month high. Also, Brent oil is evidently nearing the desired level of $80 a barrel after the world's biggest oil producer and OPEC member, Saudi Arabia, has agreed to maintain oil prices in excess of $80. Additionally, Trump's oil sanctions on Iran are taking effect as Iran's oil exports have declined by 35% since April.
Despite, rising trade war concerns, Brent futures increased considerably following Saudi's stance regarding oil prices and depleting Iran oil exports. Under circumstances where oil prices are likely to remain high, investing in stocks of oil companies seems prudent.
WTI Crude Price Scales Two-Month High
On Sep 19, WTI crude price rose 1.8% to reach $71.12, registering a rise in five of the seven straight sessions and reached its best level since Jul 10. Also, Brent crude price advanced 0.5% to settle at $79.40, closing near the $80 level.
The immediate trigger for the gains was a report from the U.S. Energy Information Administration (EIA) per which U.S. commercial crude oil inventories fell 2.1 million barrels to 394.1 million for the week ended Sep 14. U.S. commercial crude oil inventories posted their fifth consecutive weekly fall and reached the lowest level since 2015.
Saudi Comfort: Boon for Oil Prices
Per a Reuters report earlier this month, Saudi Arabia has agreed to keep oil prices "at about $80 and they don't want prices to go below $70." In fact, the largest oil producer is aiming to cap oil prices and maximize revenues.
Further, on Sep 18, Saudi Arabia reportedly said that for the short run the country is comfortable with present crude prices - Brent oil prices increasing over $80 per barrel.
According to the InterContinental Exchange, calls to purchase Brent futures at $80 a barrel and $85 per barrel by next week jumped around 45% on Sep 17 and Sep 18. Brent futures are expected to touch about 54 million barrels by next week.
Iran Sanctions Boost Oil Prices
On May 8, President Trump canceled the Iran nuclear deal and called it "a horrible one-sided deal that should have never, ever been made." After initial criticism, Trump's decision is clearly showing results now. With less than two months left before U.S. sanctions on Iranian crude on Nov 5, Iranian oil exports fell 35% from April to early September.
In fact, Iran's third-largest oil exporter, South Korea, has already stopped obtaining oil from Iran last month after purchasing 194,000 barrels per day in July Major exporters like India, China and Japan, are preparing to live without Iranian crude supplies ahead of the Nov 5 deadline.
Further, in a visit to India this month, U.S. Secretary of State Mike Pompeo said that "purchases of Iranian crude will go to zero from every country" and necessary sanctions will be placed. Additionally, 71 foreign companies are planning to exit Iran, as per data by think tank, Foundation for Defense of Democracies.
5 Hot Picks
Oil prices have found support from Saudi Arabia's comfort and anticipation of a fall in Iran's oil exports. Investing in oil stocks looks prudent now. However, picking winning stocks may be difficult.
This is where our VGM Score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score.
In this context, we have narrowed down our search to the following stocks based on a good VGM Score and Zacks Rank. You can see the complete list of today's Zacks #1 Rank stocks here .
Plains GP Holdings, L.P. PAGP is an operator of midstream energy infrastructure in the United States and Canada.
The company is based in Houston, TX and carries a Zacks Rank #2. The company has a VGM Score of A. The expected earnings growth rate for the current year is 68.72%. The Zacks Consensus Estimate for the current year has improved 10% over the past 60 days.
CNX Resources Corporation CNX is an independent oil and natural gas company that explores, develops and produces natural gas in the Appalachian Basin.
The company is based in Canonsburg, PA and sports a Zacks Rank #1. The company has a VGM Score of B. The expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for the current year has improved 52.9% over the past 60 days.
Northern Oil and Gas, Inc. NOG is an independent energy company, involved in the acquisition, exploration, exploitation, development and production of crude oil and natural gas properties in the United States.
Based in Minnetonka, MN, the company has a Zacks Rank #2 and VGM Score of B. The expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for the current year has improved 29.3% over the past 60 days.
Denbury Resources Inc. DNR is an independent oil and natural gas company in the United States, and holds interests in various oil and natural gas properties.
The company is based in Plano, TX and carries a Zacks Rank #2. It has a VGM Score of A. The expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for the current year has improved 17.5% over the past 60 days.
Exterran Corporation EXTN is involved in the compression, production and processing of products and services for the oil and natural gas industry globally.
The company is based in Houston, TX and carries a Zacks Rank #2. It has a VGM Score of A. The expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for the current year has improved 27.5% over the past 60 days.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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