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OPEC's Efforts for Price Push Puts 3 Oil Stocks in Spotlight
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The coronavirus-led lockdown has put a lid on global oil demand as the drastic decline in travelling is hitting the industry hard. In addition, a month-long dispute between major oil producers Saudi Arabia and Russia had dragged oil prices as well.
However, the Organization of Petroleum Exporting Countries and its allies (OPEC+) finally drafted a historic plan to curb global oil output in a bid to diminish the oversupply of oil at a time when demand for the commodity is nearing rock bottom.
Now it remains to be seen if this production cut alone can sustain oil prices in the months ahead. After all, the reduction in production will begin in May and continue through April 2022. Keeping these cutbacks in mind, let’s take a look at a couple of stocks within the industry.
Effective Global Oil Cuts Above 19 Million bpd
Oil prices already touched the nadir during the lockdown. U.S. crude dropped to $19.27 a barrel in March-end, its lowest since 2002 while Brent crude dropped below $23 on the same day, hitting its worst level in 17 years. Fears about the price war between Saudi Arabia and Russia triggered a sell-off as well. All this eventually caused a sharp drop in oil prices.
However, after almost a week-long discussion, bilateral calls and ministerial video conferences, the OPEC+ and the group of 20 countries arrived at a consensus to lift oil prices. The proposal was even supported by Mexico, which had earlier refused to settle for production ramp-down.
Mexico had been asked to trim production by 400,000 bpd initially, which the country opposed. The country agreed upon 100,000 bpd cuts, which weren’t enough to address the excess supply of the commodity in global markets. This is where the United States stepped in. President Donald Trump nodded to compensate Mexico’s share by slashing volumes by 250,000-300,000 bpd, a move the president confirmed was already on track.
OPEC+ will reduce 9.7 million barrels a day, which is just lower than the initially proposed 10 million. The production cuts will be effective May 1 through June-end. From Jul 1 through Dec 31, total production will decrease to 8 million bpd. These cuts will be followed by a production decline to 6 million bpd from Jan 1, 2021 to Apr 30, 2022.OPEC+ will meet in June via teleconference to make a decision on output policy.
However, even if the production cuts are in place, demand for oil will play a crucial role in boosting prices. Demand for the commodity has already shrunk to a third by the pandemic. After all, airplanes are grounded and vehicles are off the road because of the stringent standstill measures by countries. This is why the production cuts were agreed upon until 2022, in case the virus continues to take a toll on global economies.
However, these collective production cuts could certainly stop oil prices from sliding further in such trying times. For this reason, investors could keep an eye on stocks in the Oils-Energyindustry.
Superior Energy Services, Inc. is a provider of oilfield services and equipment to oil and natural gas exploration and production companies. The Zacks Consensus Estimate for Superior Energy Services’ current-year earnings has moved 1.3% north in the past 60 days. The company’s expected earnings growth rate for the current year is more than 100%. Superior Energy Services, which belongs to Zacks Oil and Gas - Mechanical and Equipment industry, carries a Zacks Rank #2 (Buy).
Noble Corporation plc (NE - Free Report) is an offshore drilling contractor for the oil and gas industry. The Zacks Consensus Estimate for Noble’s current-year earnings has moved 15% north in the past 60 days. The company’s expected earnings growth rate for the next quarter is 11.8%. Noble, which belongs to Zacks Oil and Gas - Drilling industry, carries a Zacks Rank of 2.
Kinder Morgan, Inc. (KMI - Free Report) is an energy infrastructure company. The Zacks Consensus Estimate for Kinder Morgan’s current-year earnings has moved 1% north in the past 60 days. The company’s expected earnings growth rate for the current year is 3.2%. Kinder Morgan, which belongs to Zacks Oil and Gas - Production and Pipelines industry, carries a Zacks Rank #3 (Hold).
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OPEC's Efforts for Price Push Puts 3 Oil Stocks in Spotlight
The coronavirus-led lockdown has put a lid on global oil demand as the drastic decline in travelling is hitting the industry hard. In addition, a month-long dispute between major oil producers Saudi Arabia and Russia had dragged oil prices as well.
However, the Organization of Petroleum Exporting Countries and its allies (OPEC+) finally drafted a historic plan to curb global oil output in a bid to diminish the oversupply of oil at a time when demand for the commodity is nearing rock bottom.
Now it remains to be seen if this production cut alone can sustain oil prices in the months ahead. After all, the reduction in production will begin in May and continue through April 2022. Keeping these cutbacks in mind, let’s take a look at a couple of stocks within the industry.
Effective Global Oil Cuts Above 19 Million bpd
Oil prices already touched the nadir during the lockdown. U.S. crude dropped to $19.27 a barrel in March-end, its lowest since 2002 while Brent crude dropped below $23 on the same day, hitting its worst level in 17 years. Fears about the price war between Saudi Arabia and Russia triggered a sell-off as well. All this eventually caused a sharp drop in oil prices.
However, after almost a week-long discussion, bilateral calls and ministerial video conferences, the OPEC+ and the group of 20 countries arrived at a consensus to lift oil prices. The proposal was even supported by Mexico, which had earlier refused to settle for production ramp-down.
Mexico had been asked to trim production by 400,000 bpd initially, which the country opposed. The country agreed upon 100,000 bpd cuts, which weren’t enough to address the excess supply of the commodity in global markets. This is where the United States stepped in. President Donald Trump nodded to compensate Mexico’s share by slashing volumes by 250,000-300,000 bpd, a move the president confirmed was already on track.
OPEC+ will reduce 9.7 million barrels a day, which is just lower than the initially proposed 10 million. The production cuts will be effective May 1 through June-end. From Jul 1 through Dec 31, total production will decrease to 8 million bpd. These cuts will be followed by a production decline to 6 million bpd from Jan 1, 2021 to Apr 30, 2022.OPEC+ will meet in June via teleconference to make a decision on output policy.
However, even if the production cuts are in place, demand for oil will play a crucial role in boosting prices. Demand for the commodity has already shrunk to a third by the pandemic. After all, airplanes are grounded and vehicles are off the road because of the stringent standstill measures by countries. This is why the production cuts were agreed upon until 2022, in case the virus continues to take a toll on global economies.
However, these collective production cuts could certainly stop oil prices from sliding further in such trying times. For this reason, investors could keep an eye on stocks in the Oils-Energyindustry.
3 Stocks to Consider
We have, therefore, rounded up three stocks that are involved in activities in the oil industry. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Superior Energy Services, Inc. is a provider of oilfield services and equipment to oil and natural gas exploration and production companies. The Zacks Consensus Estimate for Superior Energy Services’ current-year earnings has moved 1.3% north in the past 60 days. The company’s expected earnings growth rate for the current year is more than 100%. Superior Energy Services, which belongs to Zacks Oil and Gas - Mechanical and Equipment industry, carries a Zacks Rank #2 (Buy).
Noble Corporation plc (NE - Free Report) is an offshore drilling contractor for the oil and gas industry. The Zacks Consensus Estimate for Noble’s current-year earnings has moved 15% north in the past 60 days. The company’s expected earnings growth rate for the next quarter is 11.8%. Noble, which belongs to Zacks Oil and Gas - Drilling industry, carries a Zacks Rank of 2.
Kinder Morgan, Inc. (KMI - Free Report) is an energy infrastructure company. The Zacks Consensus Estimate for Kinder Morgan’s current-year earnings has moved 1% north in the past 60 days. The company’s expected earnings growth rate for the current year is 3.2%. Kinder Morgan, which belongs to Zacks Oil and Gas - Production and Pipelines industry, carries a Zacks Rank #3 (Hold).
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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.
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