What Are The Top Oil Stocks To Watch This Week?
Oil stocks have been surging recently as investors are anticipating the beaten-down sector to make a comeback. The jump in prices of oil stocks is expected. That’s because WTI, the main U.S. oil price benchmark is up around 50% in one month to about $39.52 (at the time of writing). Meanwhile, Brent Crude, the global benchmark, is up 37.2% in one month to about $42.48 a barrel. The jump we saw in oil stocks last Friday was due to the extension of historic production cuts from OPEC and its partners for another month. In addition to that, the unexpected drop in unemployment figures also helps lift the stock market and oil prices.
One day after OPEC and its partners agreed to extend record oil production cuts until the end of July, Saudi Arabia has raised the selling prices for its crude grades to all destinations for July. The hike from Saudi may force other Gulf oil producers to follow the increase in pricing. With OPEC’s support for oil prices and unexpected improvement in the unemployment rate, investors are gaining confidence that the worst is over. It’s fair to assume that oil prices should continue to improve. As such, here are a few oil stocks that could be well-positioned to benefit from higher oil prices.
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Best Oil And Gas Stocks To Buy Right Now [Or Sell]: Continental Resources
First, up the list, Continental Resources (CLR Stock Report) is one of the great oil stocks to buy amid improving oil prices. Right now, CLR stock is down roughly 46% year to date. That’s mainly due to the fact that global oil demand came to a halt earlier this year, which saw oil futures briefly in negative territory. But the company has taken a number of steps to increase their chances of weathering the storm.
In February, the company decided not to produce into an oversupplied market. It reduced its capital spending to 2019 levels. Looking back, it turned out to be a prescient move as the West wasn’t even hit by Covid-19 yet. Also, Continental Resources shut roughly 70% of its crude output in May. This puts the company into a stronger financial position. Buying CLR stock based on the expectations that oil prices will be rising further might work. But, there is more to it than just an increase in oil prices. Right now, the company is the lowest cost operator among oil-weighted peers. The cash of operating and sustaining its business is around $30 WTI. Right now, it is $9 above the cost price, meaning financial pressure on the company is rapidly lingering. Continental Resources’s decision to refrain from hedging production allows the company to immediately profit from higher average selling prices.
Best Oil And Gas Stocks To Buy Right Now [Or Sell]: Occidental Petroleum
Occidental Petroleum (OXY Stock Report) will be another major beneficiary of improving oil prices. OXY stock shot up 33.7% on Friday to $20.79. It was the largest daily percentage increase in the history of OXY stock. The stock has climbed for five straight days, rising more than 60% just last week alone.
Despite the improving outlook of the oil sector, Occidental Petroleum is not out of the woods yet. Investors expect the company to honor multi-billion dollar debt maturities in the next few months, making OXY the most troubled name in the oil patch. In case the company fails to divest some of its assets soon, the company would have difficulty surviving on the current free cash flows of the company. So where would this take us? The obvious solution to defer the troubled financial position would be issuing new equity and taking on more debt. If that’s the case, would existing investors be better off cashing out their position? Or should they take the risks and bet on Occidental to remain solvent until oil prices recover?
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To Buy Or Sell Oil Stocks Now?
Investors are optimistic about oil companies and are hopeful that the worst would soon be over. That’s a perfectly reasonable position to take. Yet, there is still a large stockpile of oil, and the possibility of a second wave of Covid-19 is not out of the picture. While it is nice to see some optimism, until there is clear evidence that the demand is coming back to a significant level, investors should remain cautious when looking for the best oil stocks to buy.