The U.S. energy sector has been burgeoning lately. With rising oil prices and consistent efforts by the government to keep production high, gains for the space have been abundant. Experts are of the view that China’s tariffs on its natural gas imports from America will end up harming the world’s second largest economy more.

Moreover, energy production in the United States is expected to breach new records in the third quarter. Notably, the Energy Select Sector SPDR ETF (XLE) has gained 1.2% in the past 30 days. Under such encouraging conditions, investing in stocks from the space seems prudent.

Tariffs on U.S. Energy to Hurt China More

On Sept. 21, China imposed a 10% tariff on natural gas imports from the United States in a bid to hurt the U.S. energy sector. This came right after the Trump administration slapped tariffs of 10% on an additional $200 billion worth of Chinese goods.

On the face of it, the tariffs might seem disruptive to the growth of the U.S. energy sector. However, the fact that the current 10% level would be increased to 25% from Jan. 1, 2019 will lead companies in the United States to look for alternatives. Further, America does not export much to China because of the huge U.S.-China trade deficit.

Consequently, China stands to lose if it chooses to impose retaliatory tariffs on goods sourced from America. Further, economists opine that these tariffs could also cost the Asian giant about 0.6% of its GDP.

U.S. Energy Production to Hit Record High in Q3

Per the latest report by the American Petroleum Institute on Sep 24, third-quarter outlook for the U.S. energy industry appears encouraging. The report debunks claims that energy sector in America is likely to be hurt by trade war woes. It throws light on a very important fact that the country’s overall petroleum trade balance increased an impressive 56% in the last two months. The metric surged to 4.54 million barrels per day (MBD) in August from 2.9 MBD in June.

Petroleum demand in America surged to 20.8 million barrels per day over the last one-month period. This was its strongest demand for any specific month since August 2007 and was driven primarily by motor gasoline, distillate and refinery feedstocks. Additionally, gasoline demand in the country touched its highest level last month since 1945.

4 Best Picks

Despite China’s efforts to harm America’s energy sector, the space has been witnessing immense growth of late. This can be attributed to rising oil prices, improving production and a booming U.S. economy. Such conditions make the U.S. energy sector a hotbed of money.

In this context, we have selected four stocks that are expected to gain from the abovementioned factors. These four stocks carry a Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CNX Resources Corporation CNX is an independent oil and natural gas company that explores, develops and produces natural gas in the Appalachian Basin.

The company is based out of Canonsburg, PA and sports a Zacks Rank #1. The expected earnings growth rate for the current year is more than 500%. The Zacks Consensus Estimate for the current year has improved 42.3% over the past 60 days.

Apache Corporation APA is an explorer, developer and producer of natural gas, crude oil, and natural gas liquids (NGLs).

This Zacks Rank #2 company is based out of Houston, TX. The expected earnings growth rate for the current year is more than 600%. The Zacks Consensus Estimate for the current year has improved 10.3% over the past 60 days.

Northern Oil and Gas, Inc. NOG engages in acquisition, exploration, development and production of crude oil and natural gas properties.

The company is based out of Minnetonka, MN and carries a Zacks Rank #2. The expected earnings growth rate for the current year is more than 200%. The Zacks Consensus Estimate for the current year has improved 34.2% over the past 60 days.

Denbury Resources Inc. DNR is an independent oil and natural gas company in the United States, and holds interests in various oil and natural gas properties.

This Zacks Rank #1 company is based out of Plano, TX. The expected earnings growth rate for the current year is more than 200%. The Zacks Consensus Estimate for the current year has improved 20% over the past 60 days.