Oil Rockets Past $90 As Supply Crunch Meets Surging Demand: Which Energy Stocks Are Poised To Profit?

WTI crude prices have blasted through the $90 per barrel mark on Friday, hitting levels not seen in the last 10 months.

This upward trajectory in oil prices is primarily attributed to an improving global demand outlook coupled with tightening supplies.

Over the past three months, the U.S. oil benchmark has witnessed a remarkable 30% increase in price, firmly establishing itself in bull market territory. Furthermore, it has seen a nearly 4% surge just this week, on track for its third consecutive weekly gain.

Before examining which U.S. stocks are poised to benefit the most from this bullish trend, it’s worth looking at the factor behind the surge in oil prices.

WTI Daily Chart: Crude Prices Have Risen 30% Over The Past Three Months

Demand Outlook

Rising oil prices can be attributed to stronger-than-expected economic data in the United States, which has dispelled fears of an economic slowdown. This resurgence of economic momentum has sustained the demand for crude oil.

Additionally, China has responded to its economic challenges by implementing stimulus measures to revive economic activity and investments, further boosting the demand for oil. China’s central bank’s decision to cut cash reserve requirements for all banks underscores its commitment to economic recovery.

On the monetary policy front, the prospect of central banks nearing the end of their tightening campaigns are providing relief to commodities. The European Central Bank, for instance, recently hiked interest rates by 25 basis points but signaled that the current level is sufficiently high to bring inflation back to target, indicating a possible end to interest rate hikes.

Supply Constraints

On the supply side, oil producers are extending production cuts. Saudi Arabia and Russia have jointly committed to reducing output by 1.3 million barrels per day until the end of the year, effectively constraining oil production.

Furthermore, oil inventories are at historically low levels, leaving no significant surplus to flood the market.

Notably, the U.S. Strategic Petroleum Reserve reported a stockpile of 350,630 thousand barrels for the week ending Sept. 8, holding at historic lows not seen in over four decades.

Stock Sensitivity To Oil Prices

To assess which stocks are most sensitive to these oil price fluctuations, we can examine the beta values of major American companies in the oil sector.

Beta measures a stock’s sensitivity to changes in oil prices. The closer the beta to 1, the greater sensitivity of the stock’s return.

Here are the results for some prominent U.S. oil-related stocks:

Halliburton Co. takes the lead with the highest beta value of 0.75, indicating its substantial sensitivity to oil price swings. It’s closely followed by Marathon Oil, EOG Resources and Schlumberger N.V., with beta values at high 60s.

On the flip side, stocks like Marathon Petroleum Corp. and Exxon Mobil Corp. have lower beta values, suggesting a more conservative response to oil price changes.

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Image created using artificial intelligence with MidJourney.