The bonds of Occidental Petroleum and other junk-grade energy companies offer a high-yielding way to play the depressed oil and gas sector and are an alternative to battered energy stocks, Barron’s reported.

Barron’s has identified energy companies, mostly in the upper tier of the junk market, that look like survivors and whose debt yields in the 8% to 12% range.

These issuers include Occidental, Marathon Oil (MRO), Parsley Energy (PE), and several companies in natural gas, such as EQT (EQT), Southwestern Energy (SWN), and Range Resources (RRC). Marathon still has investment-grade ratings.

“It’s not a question of whether oil prices recover, but how long it will take and which can survive and what is the opportunity set,” says Kevin Loome, portfolio manager of the T. Rowe Price U.S. High Yield fund (TUHYX).

Meanwhile, oil’s rally resumed -- after prices doubled over five days -- amid optimism that output cuts are easing a huge supply glut and demand losses have bottomed, Bloomberg said.

Futures in New York rose above $25 a barrel after earlier breaking above their 50-day moving average for the first time since January. Russian oil production was down 16% in the first five days of May, Interfax reported, while Plains All American Pipeline LP sees close to 1 million barrels a day of Permian shut-ins in May.

Output in North Dakota was down by 450,000 barrels a day, according to state data, though some shale drillers said they may restart output if prices rose above $30 a barrel.

Elsewhere, the easing of lockdowns should lead to a recovery in global oil demand, which in April was expected to collapse by at least 20%, an unprecedented drop, as governments told people to stay at home.

To tackle the resulting glut, OPEC and its allies agreed to a record oil output cut of 9.7 million barrels per day, about 10% of pre-coronavirus demand. That reduction began on May 1, Reuters explained.

For now though, soaring inventories are a reminder of excess supply lingering in the market.

Traders will be looking for confirmation of the API's inventory report when the official U.S. government figures from the Energy Information Administration come out later on Wednesday.

"We would tend to agree that the market has bottomed out, but would caution against getting overly excited about this," said analysts at JBC Energy. "The data trundling in for April really is shockingly bad." 

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