The Zacks Analyst Blog Highlights: Eclipse Resources, Gran Tierra Energy, Unit, Transportadora De Gas Del Sur And CrossAmerica Partners
Zacks Investment Research | Dec 28, 2018 05:26AM ET
For Immediate Release
Chicago, IL – December 28, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Eclipse Resources Corp. (NYSE:ECR) , Gran Tierra Energy Inc. (NYSE:GTE) , Unit Corp. (NYSE:UNT) , Transportadora de Gas del Sur S.A. (NYSE:TGS) and CrossAmerica Partners LP (NYSE:CAPL) .
Here are highlights from Thursday’s Analyst Blog:
Can Oil Prices Rebound in 2019? 5 Top-Ranked Picks
Oil prices staged a spectacular rebound on Dec 26, following a massive plunge on Christmas Eve. U.S. crude gained 8.7%, posting its best day since Nov 2016 after losing almost 7% on Dec 24. Analysts believe that the rebound was essentially a relief rally and much like Monday’s plunge, lacked fundamental basis.
Currently, oil is poised to end the year on a weak note. Concerns over declining global demand and surging U.S. output had heightened oversupply fears significantly over October and November. And this led to a massive drop in prices despite Trump’s decision to re impose U.S. sanctions on Iran.
However, analysts now believe that oil could experience a recovery in 2019. Fresh production curbs from OPEC and its allies will begin to have an impact on crude supplies, aided by Canada. Pipeline bottlenecks are also likely to impede U.S. production. This is why it continues to make sense to invest in select oil stocks.
Recent Plunge Had No Fundamental Basis
After a dismal plunge on Monday, oil prices rebounded strongly on Wednesday with both U.S. and Brent crude prices gaining around 8%. WTI crude increased 8.7% to close at $46.22, recovering from a 6.7% drop on Monday. Also, Brent crude gained 7.9% to end at $54.47. These were their largest one-day gains since Nov 30, 2016.
Significantly, on that date, OPEC had inked a historic deal to curb crude output. In any case, the recent plunge and subsequent recovery lacked any fundamental basis. Crude was dragged down by broader market weakness. This includes the current government shutdown, a tighter rate environment and the U.S.-China trade dispute.
2019: A Tale in Two Parts?
Considering a longer-term perspective, oil’s outlook for next year can be divided into two equal parts. The likes of JPMorgan (NYSE:JPM), Goldman Sachs (NYSE:GS), Barclays (LON:BARC) and the Energy Information Administration believe prices will rebound in the first half of 2019. Since October, crude prices have lost around 40%.
Overall, Wall Street thinks that the average price of Brent crude will come in at $68-$73 a barrel in 2019. Projections for U.S. crude are within a range of $59-$66 a barrel. The major driver for crude prices in the first half of the year is likely to be fresh production curbs from OPEC, effective from January.
Output cuts from Canada will also boost prices during this period. Meanwhile, pipeline bottlenecks will cap U.S. production increases, specifically in the Permian basin.
Fresh Headwinds Likely in 2H19
However, even though the outlook for 2019 is encouraging, the second half of the year could witness the arrival of several headwinds. U.S. output will surge during this period once the availability of Permian oil improves. Also, global economic growth is expected to decline during this period.
The most significant threat to crude prices is a slowdown in China’s economy. This will likely intensify if the United States and China fail to reach a trade agreement. Meanwhile, China has recently been producing large volumes of gasoline which threaten to create a global glut of sorts.
Our Choices
The overall outlook for crude indicates a significant improvement from the current situation even though oil prices could slip in the second half of 2019. Fresh production curbs from OPEC and its allies and output cuts from Canada are likely to play a crucial role in boosting crude prices.
This is why it makes sense to invest in select oil stocks at this point. However, picking winning stocks may be difficult.
This is where our Zacks Investment Research
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