Oil stocks have been surging in the past month as investors bet that companies in the beaten-down sector can come back from a historic rout in the first quarter.
The jump is surprising because oil itself has been so weak -- futures prices even fell into negative territory last month and continue to trade at levels that make drilling in the U.S. uneconomic. On Tuesday, U.S. crude was up more than 10%, but was still trading below $25. Most producers can’t make money at these prices even on wells whose capital costs have already been paid off.
And even with the latest surge in stock prices, it should be noted that nearly all energy stocks are down by double-digit percentages for the year.
Still, there is a new burst of optimism in the energy sector. At least five U.S. oil stocks have risen more than 50% in the past month. Surprisingly, they operate in different segments of the industry. Two are refiners, two are primarily oil producers, and one is a natural gas producer. In normal times, good news for producers would tend to be bad or neutral for refiners, because refiners have to buy from the producers.
But a wide swath of stocks are now on the rise, out of hope that the oil market rebalances and every part of the industry improves -- oil and gas producers make more money selling crude, refiners sell more gasoline, and pipelines see more activity.
The rebound is a kind of sigh of relief for the industry. Mass bankruptcies look unlikely, at least in the short term. And if riskier companies can hold out until oil prices rebound, they are likely to be in a position to produce better cash flow next year. Oil futures a year out are projecting West Texas Intermediate crude at $33.
Among the big recent winners is Apache (ticker: APA), a Houston producer whose stock fell as low as $3.80 earlier this year but has since rebounded over $12. Apache was up 4.4% on Tuesday and has more than doubled in the past month.
Fellow Houston oil producer Marathon Oil (MRO) has also been on a run, rising 61% in the past month.
Natural-gas producer EQT (EQT), which has fallen amid a prolonged slump in oversupplied natural gas markets, is now on the rebound too. The stock is up 50% in the past month and has more than doubled since the start of March.
Valero Energy (VLO), a major refiner, is up 61% in the past month. Refiners have been cutting back on processing crude because there are too few buyers. No one is driving as people stay at home to stop the virus, and gasoline is normally the number one use of crude in the U.S.
Marathon Petroleum (MPC), the largest refiner in the U.S., is in a similar spot, having risen 59% in the past month. The company reported a $9 billion quarterly loss on Tuesday, but Wall Street appeared optimistic about the rest of the year, given that Marathon made broad cuts to spending in refining and its “midstream” business that includes pipelines. Marathon is likely to operate its refineries at just 68% utilization in the second quarter.
Write to Avi Salzman at avi.salzman@barrons.com
"Oil" - Google News
May 06, 2020 at 01:38AM
https://ift.tt/3diOxWo
5 Oil Stocks That Have Climbed 50% or More in the Past Month - Barron's
"Oil" - Google News
https://ift.tt/2SukWkJ
https://ift.tt/3fcD5NP
Bagikan Berita Ini
0 Response to "5 Oil Stocks That Have Climbed 50% or More in the Past Month - Barron's"
Post a Comment