Oil surged. What stock will be next?admin
Oil prices hit their highest levels in almost 3 years as OPEC signaled a slow return to normal production whilst demand appeared to be surging higher. Just under two million people flew on airplanes in the U.S. on the holiday Friday, a record since the pandemic began.
The group (along with Russia) put a lid on oil production to keep prices high as the world recovers from the pandemic. Delighting energy bulls, the group on Tuesday decided to continue the slow process of restoring production. The aim is to hold 5.8 million barrels a day off the market, or about 6% of total global production.
What does that mean?
Oil stocks have soared in 2021 after a dismal 2020. TOGGLE has been highlighting positive price pressures in the likes of Baker Hughes, a drilling company. But there are others, through-the-cycle and small-to-midcap companies that could benefit like Marathon oil (MRO), Suncor (SU), and Exxon (XOM) – TOGGLE is already highlighting some historical analogs that bode well for these companies.
There is more good news …
Last week, under pressure from an activist investor, Exxon saw two new directors appointed to the board. The new directors are likely to push Exxon to restrict its drilling over the next few years both to conserve capital and to prepare to shift more resources toward climate-friendly policies. In addition, a Dutch court demanded that Royal Dutch Shell (RDS.A) cut its emissions more drastically, and Chevron (CVX) shareholders voted for a proposal that could lead to lower emissions.
These rulings and votes are likely to result in less oil being produced by big companies in the next few years. That will suppress supply and prop up prices. Ironically, then, the push for cleaner energy will benefit … oil prices, at least for the short term.
Stock in the spotlight
Seasonality factors are suggesting there could be meaningful upside in Pembina (PBA): TOGGLE analyzed 10 similar occasions from history and, on the basis of this analysis, concluded that in the past, the stock price rallied just shy of 5% from this point over the following week. This insight received 7 out of 8 stars in our quality assessment.