Wall Street analysts reportedly have turned more bullish on energy stocks amid the recent oil-price collapse.
Goldman Sachs analysts have issued reports recommending investors buy a range of energy stocks, Barron's reported.
Analysts are increasingly seeing value in the industry. Investors expect oil prices to rise to more than $30 a year from now, and higher from there.
Goldman Sachs analyst Bryan Singer predicts brent crude could trade at $60 in the second half of 2021. Brent futures for July eased 17 cents, or 0.6%, to $26.31 by 1:42 p.m. ET Friday. The June contract expired on Thursday at $25.27.
Singer favors two producers he considers “quality on sale” — EOG (EOG) and Pioneer Natural Resources (PXD), Barron's said.
Singer thinks oil stocks are in good shape now because the industry has finally set itself up for better performance.
In a separate Goldman report, analyst Neil Mehta wrote that investors can profit by taking a “barbell approach” to investing in the industry. That would entail buying both low-beta and high-beta names (with beta referring to risk or volatility in each name), Barron's explained.
Mehta’s low-beta picks include Chevron (CVX) and refiner Phillips 66 (PSX) — companies with strong balance sheets that can draw more generalist investors.
Others with relatively low beta include ConocoPhillips (CPO) and Valero (VLO). His higher-beta names include refiner Marathon Petroleum (MPC) and Canadian integrated company Suncor (SU), names that Singer also likes. The highest-beta names Mehta favors are producers Kosmos Energy (KOS) and Par Pacific Holdings (PARR).
Meanwhile, U.S. West Texas Intermediate crude (WTI) was 82 cents, or 4.4% higher, at $19.66 after climbing above $20 earlier in the session, Reuters reported.
After three consecutive weeks of losses, brent was on track for a gain of more than 20% while WTI headed for an increase of about 16%.
WTI also found support after U.S. energy firms cut oil rigs for a seventh week in a row, bringing the total count down to 325, the lowest since June 2016, energy services firm Baker Hughes Co said.
The Organization of Petroleum Exporting Countries, Russia and other producers, known as OPEC+, have agreed to cut output by 9.7 million barrels per day from May 1.
Several countries and regions, including China's central province of Hubei, where the novel coronavirus behind the pandemic was first detected, are relaxing lockdowns put in place to contain the virus.
"Global petroleum stock builds likely peaked in April as oil demand contracted by nearly 25 million bpd year-over-year," according to a BofA Global Research report.
"Now, countries are emerging from lockdown, boosting demand just when OPEC+ cuts are kicking in and producers elsewhere are cutting output."
Even so, there are doubts the production reduction, the largest ever agreed, will be enough as demand is unlikely to recover rapidly.
"The production cuts are finally kicking in," said Craig Erlam, analyst at brokerage OANDA. "Prices are still extremely low though and the next two weeks will likely see extreme volatility return."
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