Bet On These 4 Energy Stocks To Tap The Rally In Crude

Pump Jack, Oilfield, Oil, Fuel, Industry, Petroleum

The price of oil  is surging since demand for the commodity is gradually approaching pre-pandemic levels. It seems oil exploration and production businesses are returning to their glory days. Although it is expected that the environmental-friendly Biden administration will slowly push for renewables, oil still appears to be the fuel of choice. In fact, the beaten-down commodity has seemingly resurrected itself. Moreover, with the price of crude at multi-year highs, oil explorers are unlikely to rush to slash production in order to address the climate risks immediately, especially when the world is demanding more oil again.

Solid Crude Price Recovery

The price of West Texas Intermediate (WTI) crude, trading at more than $69 per barrel mark, has improved drastically from the pandemic-hit April last year, when oil was in negative territory. With coronavirus vaccines being rolled out at a massive scale, leading to gradual reopening of the economy, the demand for fuel will possibly improve further.

The latest agreements by OPEC and a group of non-OPEC producers led by Russia, called OPEC+, to stick to decisions of gradually easing production cuts, have reassured that the world is again demanding more oil, paving the way for crude price recovery. Notably, after betting on fuel demand rebound, the group has decided to bring back 2.1 million barrels per day of oil supply to the market through July since May.

Explorers Returning to Shale Plays

With the massive crude price recovery, oil explorers and producers are gradually returning to shale plays. Year to date, the price of WTI crude oil improved more than 40%. This has driven the tally of oil rigs in the United States to 359, as of the week ended May 28, from 267 in the week through Dec 31, 2020. The rig count data is per Baker Hughes Company BKR.

Thus, with more rigs being added, a higher numbers of wells are likely to be drilled and completed, which in turn will lead to more production. According to U.S. Energy Information Administration’s (EIA) projection, average U.S. crude oil production in the fourth quarter of 2021 is at 11.3 million barrels per day, which will increase to 11.8 million barrels per day in 2022.

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