4 Oil Stocks To Consider Amid OPEC Uncertainty

In a meeting on Monday, July 1, OPEC agreed to extend current oil production cuts into the first quarter of 2020. Production cuts are meant to keep oil prices at optimal levels by keeping supply down. OPEC countries will withhold 1.8 million barrels a day from the market as part of the cuts.

Oil companies outside of OPEC do not have to comply with these restrictions. Therefore, they may keep production at maximum levels and benefit from OPEC production cuts that help lift global prices.

Global Turmoil

Complicating the effect of this deal, is OPEC member Iran’s decision to violate an accord that limits production of enriched uranium. This led the U.S. to re-impose sanctions preventing all business dealings with Iran, which is OPEC’s third largest oil producer. These actions have increased tensions in the Middle East significantly, adding risk to supply stability, which pushes prices higher. Prices could continue to jump if tensions in the region escalate in the coming weeks. And heightened pressure on Iran is likely to help U.S. producers.

However, the EU has managed to get around U.S. sanctions on Iran. A special vehicle for trade has been set up called RDS.A

Royal Dutch Shell is largest publicly traded oil company in the world and the fifth largest company in the world. The firm is a vertically integrated oil producer headquartered in the Netherlands and incorporated in Britain. RDS.A is trading at a slight discount compared to the industry, with a forward P/E of 11.25. It is also the only among these stocks with positive projected earnings growth for this fiscal year at 5.81%.

4. BP (LON:BP) p.l.c (NYSE:BP)

BP is sixth largest oil company in the world and is headquartered in London. BP is up 10% YTD and has a dividend yield of 5.85%. Its earnings are projected to shrink in this year, like the rest of the industry. Looking ahead, BP is projected to grow its earnings next year 1% more than its industry’s average and 12% more than the market.

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Written By: Zacks Investment Research