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Oil Continues Its Winning Streak From 2021: 4 Stocks to Buy
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After comfortably topping the S&P 500 leaderboard last year, the Oil/Energy sector has continued to move higher in 2022. While 2021 marked the best annual performance since 2009, with the space gaining 55%, crude has already risen some 10% this year. Although still in its early days, the New Year has started on a highly bullish note for the commodity.
WTI oil surged ahead to close at a two-month high of $82.64 a barrel yesterday. This is the highest settlement for the American benchmark since Nov 9 last year, when it had ended at $84.15.
Given this backdrop, it will be fruitful to invest in top-ranked stocks like Earthstone Energy , Vermilion Energy (VET - Free Report) , Murphy USA (MUSA - Free Report) and ExxonMobil (XOM - Free Report) .
Let’s first discuss the most-important factors shaping the commodity’s year-to-date uptick.
Depleting Inventories: According to the U.S. government tally, domestic crude stockpiles fell by 4.6 million barrels last week to the lowest since October 2018. In a sign of tightening supplies, total stocks with the world’s biggest oil consumer now stand at 413.3 million barrels — 14.3% less than the year-ago figure and 8% lower than the five-year average.
Easing Omicron Worries: It appears that fears of a slowdown in oil demand recovery from the Omicron variant are starting to subside, with the strain likely to be short-lived and less deadly than expected. At the same time, the available vaccines might be effective in neutralizing it.
Winter Blast: The sharp drop in temperatures in Canada and across the northern United States has curbed crude production from some regions. With a number of oil wells shut-in due to a winter storm and a blast of arctic snow, there are fears of further widespread losses in domestic output.
Favorable Demand/Supply Dynamics: Demand is set to surpass the pre-pandemic threshold of 100 million barrels per day once again this year, while supply from the OPEC+ coalition looks likely to remain restricted in the foreseeable future. Moreover, 2020’s unprecedented price collapse has prompted operators to trim their exploration budgets by billions of dollars, translating into a relatively dry pipeline of new projects.
OPEC+ Decision: The tightening demand-supply outlook prompted OPEC+ to boost output by the scheduled 400,000 barrels a day next month. The group appears to be reasonably confident about the trajectory of demand, which should be enough to absorb the additional crude.
Final Words
With support coming from several sources, the recent rise in crude prices looks most likely to continue. This means that oil companies appear poised to make money in 2022 as healthy demand could keep the commodity above $70. That sets up several energy players to generate impressive cash, at the same time fueling healthy gains in their stocks.
To take advantage of oil’s rollicking start to 2022, one might build a position by tapping into the below-mentioned Zacks Rank #1 (Strong Buy) companies.
Earthstone Energy: Earthstone has a projected earnings growth rate of 112.2% for next year. The Zacks Consensus Estimate for ESTE’s 2022 earnings has been revised 34.8% upward over the past 60 days.
Earthstone beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 93.2%. ESTE shares have gained around 139.7% in a year.
Vermilion Energy: Vermilion Energy is valued at around $2.4 billion. The Zacks Consensus Estimate for VET’s 2022 earnings has been revised 32.5% upward over the past 60 days.
Vermilion Energy has topped the Zacks Consensus Estimate by an average of 54.4% in the trailing four quarters, including a 100% beat in Q3. VET shares have gained around 186.4% in a year.
Murphy USA: Murphy USA is valued at around $5 billion. MUSA’s consensus estimate for 2022 has been revised 7.9% upward over the past 60 days.
MUSA beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 20.9%. Murphy USA has rallied around 60.2% in a year.
ExxonMobil: ExxonMobil has a projected earnings growth rate of 21.6% for next year. The Zacks Consensus Estimate for XOM’s 2022 earnings has been revised 4.6% upward over the past 30 days.
ExxonMobil beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 54.7%. XOM shares have gained around 56% in a year.
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Oil Continues Its Winning Streak From 2021: 4 Stocks to Buy
After comfortably topping the S&P 500 leaderboard last year, the Oil/Energy sector has continued to move higher in 2022. While 2021 marked the best annual performance since 2009, with the space gaining 55%, crude has already risen some 10% this year. Although still in its early days, the New Year has started on a highly bullish note for the commodity.
WTI oil surged ahead to close at a two-month high of $82.64 a barrel yesterday. This is the highest settlement for the American benchmark since Nov 9 last year, when it had ended at $84.15.
Given this backdrop, it will be fruitful to invest in top-ranked stocks like Earthstone Energy , Vermilion Energy (VET - Free Report) , Murphy USA (MUSA - Free Report) and ExxonMobil (XOM - Free Report) .
Let’s first discuss the most-important factors shaping the commodity’s year-to-date uptick.
Depleting Inventories: According to the U.S. government tally, domestic crude stockpiles fell by 4.6 million barrels last week to the lowest since October 2018. In a sign of tightening supplies, total stocks with the world’s biggest oil consumer now stand at 413.3 million barrels — 14.3% less than the year-ago figure and 8% lower than the five-year average.
Easing Omicron Worries: It appears that fears of a slowdown in oil demand recovery from the Omicron variant are starting to subside, with the strain likely to be short-lived and less deadly than expected. At the same time, the available vaccines might be effective in neutralizing it.
Winter Blast: The sharp drop in temperatures in Canada and across the northern United States has curbed crude production from some regions. With a number of oil wells shut-in due to a winter storm and a blast of arctic snow, there are fears of further widespread losses in domestic output.
Favorable Demand/Supply Dynamics: Demand is set to surpass the pre-pandemic threshold of 100 million barrels per day once again this year, while supply from the OPEC+ coalition looks likely to remain restricted in the foreseeable future. Moreover, 2020’s unprecedented price collapse has prompted operators to trim their exploration budgets by billions of dollars, translating into a relatively dry pipeline of new projects.
OPEC+ Decision: The tightening demand-supply outlook prompted OPEC+ to boost output by the scheduled 400,000 barrels a day next month. The group appears to be reasonably confident about the trajectory of demand, which should be enough to absorb the additional crude.
Final Words
With support coming from several sources, the recent rise in crude prices looks most likely to continue. This means that oil companies appear poised to make money in 2022 as healthy demand could keep the commodity above $70. That sets up several energy players to generate impressive cash, at the same time fueling healthy gains in their stocks.
To take advantage of oil’s rollicking start to 2022, one might build a position by tapping into the below-mentioned Zacks Rank #1 (Strong Buy) companies.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Earthstone Energy: Earthstone has a projected earnings growth rate of 112.2% for next year. The Zacks Consensus Estimate for ESTE’s 2022 earnings has been revised 34.8% upward over the past 60 days.
Earthstone beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 93.2%. ESTE shares have gained around 139.7% in a year.
Vermilion Energy: Vermilion Energy is valued at around $2.4 billion. The Zacks Consensus Estimate for VET’s 2022 earnings has been revised 32.5% upward over the past 60 days.
Vermilion Energy has topped the Zacks Consensus Estimate by an average of 54.4% in the trailing four quarters, including a 100% beat in Q3. VET shares have gained around 186.4% in a year.
Murphy USA: Murphy USA is valued at around $5 billion. MUSA’s consensus estimate for 2022 has been revised 7.9% upward over the past 60 days.
MUSA beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 20.9%. Murphy USA has rallied around 60.2% in a year.
ExxonMobil: ExxonMobil has a projected earnings growth rate of 21.6% for next year. The Zacks Consensus Estimate for XOM’s 2022 earnings has been revised 4.6% upward over the past 30 days.
ExxonMobil beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 54.7%. XOM shares have gained around 56% in a year.