US Crude Oil Hits Record-High in a Month: 5 Top-Ranked Picks

On Jun 22, U.S. crude price scaled record high monthly levels after the group comprising of OPEC (Oil and Petroleum Exporting Countries) countries and non-OPEC allies led by Russia decided to raise production quota. However, the increase was significantly lower than the market’s expectations.

Consequently, WTI crude price climbed 4.6%, to settle at $68.58 a barrel on the New York Mercantile Exchange. This is the highest price of WTI crude oil in the last one month and its biggest one-day gain since November 2016. At this stage, investment in energy stocks engaged primarily in oil explorations in the United States will be a lucrative option.

Decision of OPEC and non-OPEC Allies

On Jun 22, OPEC and non-OPEC allies led by Russia decided to raise oil production level to around 624,000 barrels a day in order to meet growing demand globally. Notably, in November 2016, the OPEC and non-OPEC allies took a decision to cut production to 1.2 million barrels a day in order to restore global crude oil price.

Saudi Arabia and Russia were in favor of elimination of output restrictions even if that means lower oil prices. These two countries want to increase oil supply by 1.5 million-barrels-a-day. However, Iran, Iraq, Venezuela, Libya and some other OPEC members were in favor of maintaining status quo.

Finally, OPEC and non-OPEC allies decided to raise production quota by 624,000 barrels a day in order to comply with the original 1.2 million barrels a day production target. This was much lower than 1.5 million barrels a day demanded by Saudi Arabia and Russia, indicating that oil production is likely to remain stable in 2018.

Effect on U.S. Energy Sector   

Higher oil prices will be major boon for the U.S. oil exploration industry. The U.S. shale production of crude oil is currently going on in full swing. Crude oil production is poised to hit 12 million barrels a day in 2019 making United States the world’s largest crude oil producer.  

Although China has imposed tariffs on U.S. crude, strong global demand for oil will enable the United States to seek out a substitute for China which accounts for 20% of U.S. oil exports. Higher oil price and higher volume sales will significantly increase revenues of oil majors.

Our Top Picks

Strong international demand for crude oil, tight global oil inventories and stabilization of oil production level will boost oil price rally in the near term. Consequently it will be a prudent move to invest in good energy stocks. However, picking winning stocks can be a difficult task.

This is where our VGM Score comes in Handy. 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 the winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score.

We have narrowed down our search to the following stocks, each of which has a Zacks Rank #1 (Strong Buy) and a VGM Score B. You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows price performance of our five picks in the last three months.

 

Continental Resources Inc. CLR is a crude-oil concentrated, independent oil and natural gas exploration and production company with operations in the Rocky Mountain, Mid-Continent and Gulf Coast regions of the United States. It has expected earnings growth of 527.5% for the current year. The Zacks Consensus Estimate for the current year has improved by 6.3% over the last 30 days.

Parsley Energy Inc. PE is an independent oil and natural gas company. It is focused on the acquisition, development, and exploitation of unconventional oil and natural gas reserves in the Permian Basin. It has expected earnings growth of 146.4% for the current year. The Zacks Consensus Estimate for the current year has improved by 6.9% over the last 30 days.

Whiting Petroleum Corp. WLL is an independent oil and gas company that acquires, develops and explores for crude oil, natural gas and natural gas liquids primarily in the Permian Basin, Rocky Mountains, Mid-Continent, Gulf Coast and Michigan regions of the United States. It has expected earnings growth of 317.6% for the current year. The Zacks Consensus Estimate for the current year has improved by 1.4% over the last 30 days.

WildHorse Resource Development Corp. WRD is an oil and natural gas company. The company’s properties primarily consist of Eagle Ford Shale in East Texas and the Over-Pressured Cotton Valley in North Louisiana. It has expected earnings growth of 334.9% for the current year. The Zacks Consensus Estimate for the current year has improved by 6.3% over the last 30 days.

Anadarko Petroleum Corp. APC is one of the world's largest independent oil and gas exploration and production companies. Majority of the company's total proved reserves are located in the United States. It has expected earnings growth of 251% for the current year. The Zacks Consensus Estimate for the current year has improved by 7.2% over the last 30 days.

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Anadarko Petroleum Corporation (APC) : Free Stock Analysis Report
 
Whiting Petroleum Corporation (WLL) : Free Stock Analysis Report
 
Parsley Energy, Inc. (PE) : Free Stock Analysis Report
 
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Wildhorse Resource Development Corporation (WRD) : Free Stock Analysis Report
 
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