Profit From Oil Bulls With Top-Ranked Energy Stocks
Zacks Investment Research | May 21, 2018 09:31PM ET
Oil price has been enjoying a smooth sail for the past couple of months with Brent hovering near $80 per barrel, the highest since 2014, and U.S. crude trading above $72 per barrel. The rally was driven by several factors that are pointing to a rebalancing of the oil market and infusing optimism among investors.
This has pushed the energy stocks higher, making it the best-performing sector so far in the second quarter. In particular, geopolitics and a historic output deal are playing the most important role in driving oil price higher. Below, we have discussed them in detail below:
Venezuela
Venezuela is the latest catalyst given the new sanctions by the Trump administration on the OPEC-member, following the second six-year term victory for president Nicolás Maduro that would further curtail oil output in the country. Output in Venezuela has already been halved since 2005 to below 2 million barrels per day due to an economic crisis.
Iran
Donald Trump finally withdrew from the Obama-era 2015 nuclear deal and has vowed to reimpose powerful economic sanctions against the OPEC nation waivered within the deal as well as introduce new ones. Since Iran is OPEC's third-largest oil producer and exports about 2.5 million barrels a day, renewed sanctions would reduce Iranian oil exports, further tightening global supplies.
Historic Output Deal
The historic output cut deal, wherein OPEC, Russia and other producers have agreed to curb production by 1.8 million barrels per day is paying off. The group started reducing production in last January and is poised to continue throughout 2018. As the group restrains crude output for the second year, oil inventories in the world’s richest nations have now fallen Zacks Investment Research
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