World Crude Oil Price Reaches Four Year High: Four Highest Choices – September 25, 2018

On September 25, the price of crude oil reached its highest level in four years as OPEC, the largest oil cartel, and its Russian-led allies rejected President Trump's request to increase oil production to reduce prices. Oil prices were fueled by concerns over US sanctions against Iran, bottlenecks in US supply, and strong global demand.

The International Energy Agency (IEA) warned of a tense global oil market towards the end of the year. This is why the price of crude should remain robust in the short term. At this stage, investing in energy stocks that are primarily focused on oil exploration will be a prudent step.

The price of crude oil reaches its highest level in 4 years

On September 25, the benchmark Brent futures index rose 0.6% or $ 0.49 to $ 81.69 on the London ICE, its highest level since November 12, 2014. West Texas Intermediate futures contracts $ 72.30 per barrel on the New York Mercantile Exchange.

As a result of soaring crude oil prices, the Energy Select Sector SPDR ETF ETF ("XLE") gained 1.5% on September 24th. Since the beginning of the year, XLE has gained 5.5%, ranking fourth in the 11 sectors based on the S & P 500 Index.

US sanctions against Iran approaching

In May, the United States left the Iranian nuclear pact formed in 2015. In addition, the Trump administration threatened all countries with US sanctions if they did not stop importing oil from Iran before 4 November.

According to J.P. Morgan and Bank of America Merrill Lynch, US sanctions against Iran would result in a loss of about 1.5 million barrels per day (bpd) of crude oil. Commodity traders Trafigura and Mercuria have estimated that about 2 million bpd of oil will be removed from the international market after 4 November.

Supply shortage in Venezuela, Libya and the United States

At present, the combined oil supply of Iran, Libya and Venezuela is at its lowest since January. Venezuela is plagued by economic instability and its oil production is not expected to normalize until the end of 2018. Libya has yet to emerge from the civil war that has significantly reduced its oil production.

In the last five consecutive weeks, the Energy Information Administration ("EIA") has reported a decline in crude inventories in the United States. It is currently at its lowest level since the beginning of 2015. Limited US drilling activity may result in lower production.

Price of crude oil likely to remain firm

Demand for oil remains strong. In July, OPEC estimated that total global oil consumption is expected to reach 98.85 billion barrels per day and 110 million barrels per day in 2018 and 2019, respectively. Strong demand and tightening of supply are likely to drive up oil prices.

JP Morgan has raised his Brent price target to $ 90 per barrel in the coming months. Trafigura and Mercuria predicted that Brent could reach $ 90 at Christmas and exceed $ 100 by early 2019.

Our best choices

Strong international demand for crude oil, tight global oil stocks and stabilization of oil production will boost oil prices in the near term. Therefore, it will be lucrative to invest in good energy stocks. However, choosing winning actions can be a difficult task.

It is there that our VGM partition is useful. Here, V represents Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select the winners. However, it is important to keep in mind that each style note will have a different weight when arriving at a VGM score.

We limited our search to the following actions, each with a rank of Zacks # 1 (strong purchase) or 2 (purchase) and a VGM score of A or B.

The graph below shows the price performance of our four choices over the last three months.

Petroleo Brasileiro S.A. – Petrobras (ACB – Free Report) is an integrated company operating in the sectors of exploration, production, refining, retail and transportation of oil and its by-products. It forecasts a profit growth of 134.3% for the current year. The Zacks consensus estimate for the current year has improved 7.9% over the past 60 days. The company has a Zacks ranking of # 1 and a VGM score of B. You can see the complete list of today's # 1 Zacks # 1 stocks here.

W & T Offshore Inc. (WTI – Free Report) is an independent oil and gas exploration company, mainly concentrated in the Gulf of Mexico region, including deep waters. It expects profit growth of 60.7% for the current year. The Zacks consensus estimate for the current year has improved 4.7% over the past 60 days. The company has a # 1 Zacks rank and a VGM VG score.

Northern Oil and Gas Inc. (NOG – Free Report) is an oil exploration and production company with the Williston Basin as the main focus. It expects profit growth of 292.9% for the current year. The Zacks consensus estimate for the current year has improved by 34.1% in the last 60 days. The company has a Zacks rank # 2 and a VGM score of B.

Denbury Resources Inc. (DNR – Free Report) operates as an independent petroleum and natural gas company in the United States. It expects profit growth of 242.9% for the current year. The Zacks consensus estimate for the current year has improved by 20% over the past 60 days. He has a # 2 Zacks rank and a VGM score of A.

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