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.
OPEC's Monthly Oil Market Report: Here Are the Key Takeaways
Read MoreHide Full Article
OPEC's latest Oil Market Report presents an optimistic view of the global oil market. The organization revised its global economic growth forecast for 2024 slightly higher to 2.9%, attributing this adjustment to stronger-than-expected performance in key economies such as Brazil, Russia, India and China, and a recovery in the eurozone. OPEC maintains its oil demand growth forecast at 2.2 million barrels per day (mbd) for 2024, reflecting a solid usage supported by economic growth and increased air travel.
The agency’s positive messaging about oil demand allows investors to get into stocks like SM Energy Company (SM - Free Report) , Sunoco LP (SUN - Free Report) and Tullow Oil (TUWOY - Free Report) .
Supply-Side Considerations
On the supply side, the cartel has maintained its non-OPEC+ liquids supply growth estimate at 1.23 million barrels per day for 2024 and 1.10 million barrels per day for 2025. The growth will primarily be driven by the United States, Canada and Brazil. In June, OPEC+ crude production fell by 125,000 barrels per day to 40.8 million barrels per day, which is 2.3 million barrels per day below OPEC's projected demand. This production restraint, combined with solid demand, suggests a potential supply deficit in the coming months.
Economic and Geopolitical Factors
OPEC also highlighted the impact of the U.S. Federal Reserve's monetary policy on the oil market. The Fed's hawkish stance and high interest rates have increased capital costs, limiting investment in upstream exploration and production. Furthermore, a stronger U.S. dollar, driven by high interest rates, has raised prices for oil and other commodities. However, OPEC remains optimistic that the Fed might cut rates later this year, potentially easing these pressures.
Comparing OPEC and IEA Projections
OPEC's projections contrast sharply with those of the International Energy Agency (IEA). While OPEC expects robust demand growth, the IEA is more conservative, forecasting growth of only 960,000 barrels per day in 2024. The IEA also predicts that global oil demand will peak at 106 million barrels per day by 2029, reflecting a shift toward greener energies and a decline in oil use for road transportation.
Impact of EIA’s Weekly Inventory Report
The EIA’s weekly inventory reports play a crucial role in oil price dynamics. The recent report indicated a second consecutive week of declining U.S. crude oil inventories, which, along with increased refinery capacity use, suggests strong demand. This inventory drawdown has supported the oil price, pushing it to around $82 per barrel. Analysts are looking for sustained inventory reductions to confirm expectations of stronger summer fuel demand.
The Way Forward for Oil
Looking ahead, OPEC's steady demand forecasts and the potential for supply constraints provide a supportive backdrop for prices. While geopolitical tensions and economic uncertainties remain, the underlying demand growth, particularly from transportation fuels and petrochemical production, is expected to sustain the market.
3 Stocks to Buy
Considering this relatively bullish picture, we recommend Oil/Energy investors to accumulate stocks like SM Energy Company, Sunoco LP and Tullow Oil. Sunoco currently sports a Zacks Rank #1 (Strong Buy), while SM Energy and Tullow carry a Zacks Rank #2 (Buy) each.
SM Energy Company: SM beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters. The independent oil and gas exploration and production company has a trailing four-quarter earnings surprise of 13.8% on average.
SM is valued at around $5 billion. SM Energy has seen its shares increase 47% in a year.
Sunoco LP: The Zacks Consensus Estimate for 2024 earnings of Sunoco indicates 99.7% growth.
The leading energy infrastructure and fuel distributors is valued at around $5.6 billion. Sunoco has seen its stock rise 36.3% in a year.
Tullow Oil: TUWOY is valued at some $573.7 million. Over the past 60 days, the Zacks Consensus Estimate for 2024 earnings has increased 20%.
Tullow Oil enjoys a Value, Growth and Momentum Score of A, B and B, respectively, each helping it round out with a VGM Score of A. The Africa-focused hydrocarbon producer and explorer shares have gained 24.4% in a year.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
OPEC's Monthly Oil Market Report: Here Are the Key Takeaways
OPEC's latest Oil Market Report presents an optimistic view of the global oil market. The organization revised its global economic growth forecast for 2024 slightly higher to 2.9%, attributing this adjustment to stronger-than-expected performance in key economies such as Brazil, Russia, India and China, and a recovery in the eurozone. OPEC maintains its oil demand growth forecast at 2.2 million barrels per day (mbd) for 2024, reflecting a solid usage supported by economic growth and increased air travel.
The agency’s positive messaging about oil demand allows investors to get into stocks like SM Energy Company (SM - Free Report) , Sunoco LP (SUN - Free Report) and Tullow Oil (TUWOY - Free Report) .
Supply-Side Considerations
On the supply side, the cartel has maintained its non-OPEC+ liquids supply growth estimate at 1.23 million barrels per day for 2024 and 1.10 million barrels per day for 2025. The growth will primarily be driven by the United States, Canada and Brazil. In June, OPEC+ crude production fell by 125,000 barrels per day to 40.8 million barrels per day, which is 2.3 million barrels per day below OPEC's projected demand. This production restraint, combined with solid demand, suggests a potential supply deficit in the coming months.
Economic and Geopolitical Factors
OPEC also highlighted the impact of the U.S. Federal Reserve's monetary policy on the oil market. The Fed's hawkish stance and high interest rates have increased capital costs, limiting investment in upstream exploration and production. Furthermore, a stronger U.S. dollar, driven by high interest rates, has raised prices for oil and other commodities. However, OPEC remains optimistic that the Fed might cut rates later this year, potentially easing these pressures.
Comparing OPEC and IEA Projections
OPEC's projections contrast sharply with those of the International Energy Agency (IEA). While OPEC expects robust demand growth, the IEA is more conservative, forecasting growth of only 960,000 barrels per day in 2024. The IEA also predicts that global oil demand will peak at 106 million barrels per day by 2029, reflecting a shift toward greener energies and a decline in oil use for road transportation.
Impact of EIA’s Weekly Inventory Report
The EIA’s weekly inventory reports play a crucial role in oil price dynamics. The recent report indicated a second consecutive week of declining U.S. crude oil inventories, which, along with increased refinery capacity use, suggests strong demand. This inventory drawdown has supported the oil price, pushing it to around $82 per barrel. Analysts are looking for sustained inventory reductions to confirm expectations of stronger summer fuel demand.
The Way Forward for Oil
Looking ahead, OPEC's steady demand forecasts and the potential for supply constraints provide a supportive backdrop for prices. While geopolitical tensions and economic uncertainties remain, the underlying demand growth, particularly from transportation fuels and petrochemical production, is expected to sustain the market.
3 Stocks to Buy
Considering this relatively bullish picture, we recommend Oil/Energy investors to accumulate stocks like SM Energy Company, Sunoco LP and Tullow Oil. Sunoco currently sports a Zacks Rank #1 (Strong Buy), while SM Energy and Tullow carry a Zacks Rank #2 (Buy) each.
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. The independent oil and gas exploration and production company has a trailing four-quarter earnings surprise of 13.8% on average.
SM is valued at around $5 billion. SM Energy has seen its shares increase 47% in a year.
Sunoco LP: The Zacks Consensus Estimate for 2024 earnings of Sunoco indicates 99.7% growth.
The leading energy infrastructure and fuel distributors is valued at around $5.6 billion. Sunoco has seen its stock rise 36.3% in a year.
Tullow Oil: TUWOY is valued at some $573.7 million. Over the past 60 days, the Zacks Consensus Estimate for 2024 earnings has increased 20%.
Tullow Oil enjoys a Value, Growth and Momentum Score of A, B and B, respectively, each helping it round out with a VGM Score of A. The Africa-focused hydrocarbon producer and explorer shares have gained 24.4% in a year.