5 Oil Stocks To Buy Ahead Of Crucial OPEC-Russia Meeting
Zacks Investment Research | Dec 03, 2018 08:30PM ET
Crude oil prices have been showing signs of recovery following the meltdown in November. Both WTI and Brent crude plunged to their lowest levels so far this year in last month. Supply glut, fear of global economic slowdown and higher U.S. dollar price were primary reasons behind plummeting crude oil prices.
However, with December witnessing alleviation of the above-mentioned problems, there have been indications of revival in crude oil prices. Moreover, OPEC and Russia led oil exporters will meet on Dec 6-7 to chalk out plans to restore oil prices. Consequently, investment in oil prices with a favorable Zacks Rank will be a prudent move.
Russia-Saudi Arabia Agreement
Over the weekend, Russia and Saudi Arabia have agreed on a deal to stabilize global crude prices. The OPEC (Organization of Petroleum Exporting Countries) and Russia led oil exporters will meet in Vienna in Dec 6-7 to firm up a level of reduction in output in order to restore oil prices to their October 2018 level.
Following the news, on Dec 2, U.S. benchmark West Texas Intermediate (WTI) crude for January delivery increased $2.02 or 4%, to settle at $52.95 a barrel on the New York Mercantile Exchange. Similarly, global benchmark Brent crude for February delivery rose $2.23 or 3.8%, to $61.69 a barrel. Prices of both benchmarks plunged 22% in November, the largest decline in ten years.
Per a report by Goldman Sachs (NYSE:GS), OPEC and Russia need to cut oil production by 1.3 million barrels a day to restore global oil inventories to its 5-year average level.
Developments in Canada and Quarter
On Dec 3, Rachel Notley, the Premier of Canada’s oil-rich province of Alberta, announced that she will force oil producers to cut production level by 9% in 2019 in order to stop crude oil prices from sliding further. Notably, Canada is the fourth largest oil producer worldwide.
In a separate development, Quarter has decided to quit OPEC in a bid to focus more on natural gas production than crude oil, indicating lower crude oil supply.
Trade Truce Between the United States and China
On Dec 1, the U.S. President Donald Trump and his Chinese counterpart Xi Jinping reached an initial agreement to permanently solve the eight month old trade-related conflicts between the two countries.
The truce will be valid for next 90 days during which the two countries will try to solve bilateral trade conflicts regarding technology transfer, intellectual property and agriculture. Moreover, neither side will levy any further tariff on the other during this period.
A cease fire between the United States and China regarding trade-related issues has alleviated investors’ concern regarding a global economic slowdown. Notably, many of the oil experts have projected lower global demand in 2019 anticipating the slowdown. Following this news, the ICE (NYSE:ICE) U.S. Dollar Index fell 0.2% on Dec 3. Lower U.S. dollar price will also boost global demand for oil for which U.S. dollar is the medium of exchange.
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Crude oil prices are likely to remain northbound in near term. At this stage, investment in oil exploration and production stocks will be lucrative. However, picking winning stocks can be a difficult task.
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