Market Overview

3 Trending Oil And Gas Stocks Amid Trade War, Middle East Tensions

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3 Trending Oil And Gas Stocks Amid Trade War, Middle East Tensions

With tension mounting in the world’s top oil producing region, oil and gas stocks have trended in interest and volatility in recent months.

Here’s a look at three trending energy stocks seeing increased interest.

  • Petroleo Brasil/ADR (NYSE: PBR)
  • Valero Energy Corporation (NYSE: VLO)
  • Ecolab Inc. (NYSE: ECL)

The Background

Regional turbulence has increased since the U.S. last year abandoned the Iran nuclear agreement and a civil war in Yemen became a proxy war between two regional powers, Iran and U.S. ally Saudi Arabia — the world’s largest oil producer.

Supply threats increase the price of crude, which is good for upstream oil production companies. The threat became reality last month with drone attacks on Saudi oil facilities that cut global supply.

The strike sent oil futures prices up 20% the next day — the largest one-day oil price surge since 2005’s Hurricane Katrina.

Threats to supply especially boost the fortunes of companies that source most of their oil elsewhere, such as in the Americas. They get the benefit of global price spikes, but without the interruption of supply or damage to infrastructure.

Shares in most upstream oil companies have been generally trading near all-time lows for some time, so there appears to be room for stock prices to move higher.

Petrobras

The partially state-owned Brazilian oil and gas giant may be in line to be a big beneficiary if Saudi oil production is curtailed or supply routes are disrupted.

China, the world’s largest oil importer, recently increased its buying of Brazilian oil, which is seeing record output levels.

Robert Johnston of Eurasia Group recently told Canada’s Financial Post that Brazil, along with Canada, are among the oil producers that stand to benefit most from possible Mideast supply disruptions.

See Also: JPMorgan Upgrades Valero Energy, Sees Positive Outlook For Texas Gulf Coast Refiners

Valero

Valero is a downstream player and the largest independent U.S. oil refiner.

Refiners slumped earlier this year, in part because of the trade war and concerns about the economy. But the've outperformed the rest of the energy sector in recent weeks, likely on new optimism about a thawing in the trade war.

Valero shares were up 13% in September after a rough August. Valero may have also gotten a boost from buzz around a planned new renewable diesel plant in Texas, with green energy also seen as an antidote to overreliance on Mideast oil.

Ecolab

Ecolab is a diversified company with a business that serves refineries and petrochemical plants, though it spun off its upstream oilfield business early in 2019.

While shares have gained more than 30% year to date and it has been a trending ticker recently, it may be unrelated to the oil industry, having more to do with a recent decision by U.K. regulators to disallow its acquisition of a small cleaning products business, Holchem, for anticompetitive reasons.

Posted-In: Eurasia Group Financial Post gasCommodities Politics Markets Media General Best of Benzinga

 

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