We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
This is How OPEC's Supply Cut Decision Impacts Oil Market
Read MoreHide Full Article
The month of May was a tough one for oil prices. WTI, or U.S. crude, fell by 6%, ending at $76.99 a barrel. Meanwhile, the global benchmark — Brent — declined by 7.1%, closing at $81.62 a barrel. This significant decline reflects ongoing concerns about demand and market dynamics.
Factors Behind the Year’s Biggest Monthly Loss
The primary concern was the unexpected rise in gasoline inventories, despite the beginning of the summer driving season, traditionally a period of increased demand. Analysts pointed to higher refinery runs as a key reason for this inventory build-up. Additionally, worries about sluggish demand growth in China and Europe, coupled with rising U.S. shale production, put further pressure on prices.
OPEC+ Production Cuts
The OPEC+ alliance, spearheaded by Russia and Saudi Arabia, has been implementing significant output cuts to stabilize prices. On Sunday, the cartel agreed to extend production cuts through the end of 2025. This includes maintaining existing cuts of 3.66 million barrels per day (bpd) and extending voluntary cuts of 2.2 million bpd. These measures aim to counter sluggish demand and support market stability.
Current Market Dynamics
Despite the recent slump, there are signs of optimism. As we know, OPEC+ has been crucial in balancing the market by withholding approximately 5.9 million bpd, about 6% of the global supply. Furthermore, geopolitical tensions and anticipated higher-than-usual hurricane activity in the U.S. Gulf region could disrupt supply, offering additional price support.
The Way Forward for Oil Prices
Looking ahead, the outlook for oil prices remains cautiously optimistic. Analysts believe that the extended production cuts by OPEC+ will gradually tighten supply, especially if demand improves. The summer season typically boosts gasoline demand, and any significant disruption in supply due to hurricanes or geopolitical issues could push prices higher. This dynamic could lead to a more competitive market environment, potentially stabilizing prices in the medium term.
3 Energy Stocks to Buy
Considering this relatively bullish picture, we recommend Oil/Energy investors to accumulate stocks like SM Energy Company (SM - Free Report) , Sunoco LP (SUN - Free Report) and ProPetro Holding (PUMP - Free Report) . SM Energy currently sports a Zacks Rank #1 (Strong Buy), while Sunoco and ProPetro each carry a Zacks Rank #2 (Buy).
SM Energy Company: SM beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters. SM Energy has a trailing four-quarter earnings surprise of 13.8%, on average.
SM is valued at around $5.8 billion. SM Energy has seen its shares increase 81.8% in a year.
Sunoco LP: The Zacks Consensus Estimate for 2024 earnings of Sunoco indicates 41.1% growth.
SUN is valued at around $5.1 billion. Sunoco has seen its stock rise 23.6% in a year.
ProPetro Holding: Over the past 60 days, the Zacks Consensus Estimate for 2024 earnings has moved up 39.6%.
ProPetro Holding is valued at around $1 billion. PUMP has seen its stock rise 27.6% in a year.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
This is How OPEC's Supply Cut Decision Impacts Oil Market
The month of May was a tough one for oil prices. WTI, or U.S. crude, fell by 6%, ending at $76.99 a barrel. Meanwhile, the global benchmark — Brent — declined by 7.1%, closing at $81.62 a barrel. This significant decline reflects ongoing concerns about demand and market dynamics.
Factors Behind the Year’s Biggest Monthly Loss
The primary concern was the unexpected rise in gasoline inventories, despite the beginning of the summer driving season, traditionally a period of increased demand. Analysts pointed to higher refinery runs as a key reason for this inventory build-up. Additionally, worries about sluggish demand growth in China and Europe, coupled with rising U.S. shale production, put further pressure on prices.
OPEC+ Production Cuts
The OPEC+ alliance, spearheaded by Russia and Saudi Arabia, has been implementing significant output cuts to stabilize prices. On Sunday, the cartel agreed to extend production cuts through the end of 2025. This includes maintaining existing cuts of 3.66 million barrels per day (bpd) and extending voluntary cuts of 2.2 million bpd. These measures aim to counter sluggish demand and support market stability.
Current Market Dynamics
Despite the recent slump, there are signs of optimism. As we know, OPEC+ has been crucial in balancing the market by withholding approximately 5.9 million bpd, about 6% of the global supply. Furthermore, geopolitical tensions and anticipated higher-than-usual hurricane activity in the U.S. Gulf region could disrupt supply, offering additional price support.
The Way Forward for Oil Prices
Looking ahead, the outlook for oil prices remains cautiously optimistic. Analysts believe that the extended production cuts by OPEC+ will gradually tighten supply, especially if demand improves. The summer season typically boosts gasoline demand, and any significant disruption in supply due to hurricanes or geopolitical issues could push prices higher. This dynamic could lead to a more competitive market environment, potentially stabilizing prices in the medium term.
3 Energy Stocks to Buy
Considering this relatively bullish picture, we recommend Oil/Energy investors to accumulate stocks like SM Energy Company (SM - Free Report) , Sunoco LP (SUN - Free Report) and ProPetro Holding (PUMP - Free Report) . SM Energy currently sports a Zacks Rank #1 (Strong Buy), while Sunoco and ProPetro each carry a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
SM Energy Company: SM beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters. SM Energy has a trailing four-quarter earnings surprise of 13.8%, on average.
SM is valued at around $5.8 billion. SM Energy has seen its shares increase 81.8% in a year.
Sunoco LP: The Zacks Consensus Estimate for 2024 earnings of Sunoco indicates 41.1% growth.
SUN is valued at around $5.1 billion. Sunoco has seen its stock rise 23.6% in a year.
ProPetro Holding: Over the past 60 days, the Zacks Consensus Estimate for 2024 earnings has moved up 39.6%.
ProPetro Holding is valued at around $1 billion. PUMP has seen its stock rise 27.6% in a year.