Over the last few days the oil market has started to gain momentum with prices finally rebounding to the $50 a barrel threshold mark. Oil prices, which have been under pressure over the last few months, eventually closed the day at $50.41 a barrel on Sep 20, the highest in four months. The upside can be attributed to the improving demand outlook and OPEC deal extension talks.
Both International Energy Agency and OPEC forecasted robust demand which led to an increase in oil prices. OPEC boosted oil forecasts for 2018 by 400,000 barrels of oil per day, courtesy of higher demand in China and Europe.
According to the oil cartel’s latest monthly report, OPEC production fell by 79,000 barrels a day in August as output dropped in Libya, Gabon, Venezuela and Iraq. This hints at the success of the output-curb initiatives and rising compliance levels, raising further optimism in the industry. Compliance levels rose to 94% in August as against 85% in July.
Adding to the positive momentum, OPEC and fellow exporters also announced plans to remain open to extend their production cut agreement beyond March. Some cartel members including less compliant nations like Iraq, have also signaled another around of supply cuts.
The latest weekly release of Baker Hughes also shows positive signs for the oversupplied oil market, wherein it reported a fall in oil and natural gas rig count in the United States. The total U.S. rig count fell by 8 to 936, for the week ended Sep 15.
Investors have also pinned hopes of recovery over the recent U.S. Energy Department’s inventory releases that show multiple weeks of strong inventory draws in the domestic crude stockpiles – pointing to a slowdown in shale output. The nation’s oil stockpiles have shrunk in nine of the last 12 weeks and are down more than 60 million barrels since March.
All these factors point toward the growing stability of the oil industry for the remainder of 2017, along with growth prospects in 2018.
Here’s What We Believe
We believe that investors can earn profits by extrapolating the current bullish trends of the market. Henceforth, seeking refuge on momentum investment strategy is a meaningful investment bet at this moment.
However, picking the right momentum stocks may baffle even seasoned investors, who are planning to enter the uncharted world of jam-packed trades.
With the Zacks Style Score system investors can single out stocks which will grant favorable returns and are not affected by market conditions.
The Momentum Style Score indicates the best time to buy a stock and take advantage of its momentum with a highest probability of success. At the core, momentum investing is buying high, selling higher. It is based on the idea that once a stock establishes a trend, it is more likely to continue in that direction than move against the drift. Thus, this strategy calls for hitching a ride on an already fast-moving train, without fretting about valuations or growth prospects.
That said, we pair the Momentum Style Score of A with a Zacks Rank of #1 (Strong Buy) or 2 (Buy), which as you know indicates stocks with high chances of outperforming the market over the next one to three months. You can see the complete list of today’s Zacks #1 Rank stocks here.
One of the main factors driving the Zacks Rank is estimate revisions, so stocks with high ranks as well as high momentum scores have even greater chances of short-term appreciation.
Here, we’ve picked out five energy stocks for momentum investors based primarily on these two factors:
4 Key Picks
Par Pacific Holdings, Inc. (NYSEMKT:PARR): This Texas-based upstream company operates in three segments namely refining, retail and logistics. The company currently carries a Zacks Rank #2 with a Momentum Score of A. The company delivered an average positive earnings surprise of 196.26% in the trailing four quarters.
TransCanada Corp. (NYSE:TRP): Headquartered in Alberta, TransCanada mainly focuses on natural gas transmission and power services. The company presently sports a Zacks Rank #1 with a Momentum Score of B. The company delivered an average positive earnings surprise of 4.06% in the trailing four quarters.
Galp Energia SGPS SA (OTCMKTS:GLPEY): Headquartered in Lisbon, Galp Energia SGPS SA is engaged in production, refining and marketing of oil and gas. The company currently carries a Zacks Rank #2 with a Momentum Score of B. Over the last 60 days, the Zacks Consensus Estimate has increased 3% for 2017 earnings.
Rex Energy Corp. (NASDAQ:REXX): Rex Energy is an independent oil and gas company operating in the Illinois Basin, the Appalachian Basin and the Southwest region of the United States. The company presently carries a Zacks Rank #2 with a Momentum Score of B. The company posted positive earnings surprise in three of the four trailing quarters, the average being 6.65%.
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