Oil Prices Recover On Supply Concerns: 5 Top-Ranked Picks
Zacks Investment Research | Jun 08, 2018 08:49AM ET
Oil prices surged on Jun 7, as investor concerns prevailed over an impending supply shortage from Iran, gradually declining output from Venezuela and a longer-term picture of tighter supply from OPEC (Oil and Petroleum Exporting Countries) and non-OPEC allies led by Russia.
Notably, oil prices had plummeted on Jun 6, following the U.S. Energy Information Association (EIA) report that domestic crude has registered its lowest finish in almost two months for the week ended Jun 1. Crude oil production touched a new weekly high of 10.8 million barrels a day, which is almost close to making United States the world’s biggest crude oil producer.
Increase in U.S. oil supply may compel OPEC and non-OPEC allies led by Russia to abide by a global pact on cutting oil supplies until the end of 2018. Investors’ fear of global oil shortage helped crude prices recover yesterday. At this stage, investment in energy stocks engaged in oil production, refining and marketing will be a lucrative option.
Oil Prices Recover
On Jun 7, the WTI crude rose $1.22 or 1.9%, to settle at $65.95 a barrel on the New York Mercantile Exchange. Brent futures for August settlement rose $1.96 or 2.6% to end the session at $77.32 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded $9.29 higher than the WTI.
Supply Concerns From Iran and Venezuela
At present, Venezuela and Iran are the major supply disturbances. Economic instability in Venezuela, its massive debt load, unrest in workforce and hyperinflation will take a severe toll on the country’s oil production till the end of 2018. According to Reuters, the country is embroiled in an oil supply crisis, with a delay of nearly a month in delivering oil to its customers from its main export terminals.
However, problems related to Iran started after the United States withdrew from the nuclear pact and announced plans to re-impose oil sanctions on it. The U.S. government also warned about the possibility of secondary sanctions imposed on European companies that continue to deal with Iran. Research firm Commerzbank (DE:CBKG) reported that several European oil companies have announced plans to withdraw from Iran in order to avoid the risk of U.S. sanctions.
Our Top Picks
Strong international demand for crude oil, a 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.
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