4 Energy Stocks To Reap Oil's Recent Rally

Oil’s recent rally was reflected in U.S. equity markets as stocks gained for the fourth trading session on Jan 9. Developments in macroeconomic issues drifted in investor-anticipated direction, building hopes of a positive movement in oil prices in the near future.

Therefore, this might be the right time to invest in a few energy stocks to get the most out of the oil price surge.

Why are Oil Prices Gaining?

Oil prices have been gaining steadily for the past two weeks, prompted by optimism around U.S.-China trade talks and hopes of an affirmative solution that may conclude the tariff war. A drop in U.S. inventories coupled with supply cuts to the United States from Saudi Arabia helped oil prices step up as well.

Brent crude oil price gained 2.72% on Jan 9 and closed at $61.44. West Texas Intermediate (WTI) gained 2.58% and closed at $52.36 on the same day.

Bank of America Merrill Lynch forecasts Brent Crude prices to hit $70 a barrel and WTI Crude to reach $59 a barrel in 2019.

According to Fidelity Global Special Situations fund manager Jeremy Podger, "The oil price could surprise markets by remaining strong or even rising further, either due to Middle Eastern issues (particularly around Iran) or, more happily, due to strong global demand. At this stage, we are keeping a higher than average weight in the energy sector.”

Supply Cuts and Macroeconomic Factors Boost Oil

A weekly report released on Jan 9 by Energy Information Administration (EIA) cited declining U.S. crude oil inventories last week. Crude oil inventories decreased by 1.68 million barrels in the week ended Jan 4 against consensus estimates of 2.4 million barrels stockpile draw, following a 0.007 million-barrel gain.

Gasoline inventories rose by 8.07 million barrels against an expected gain of 3.39 million barrels, the report stated. Stockpiles of distillates rose by 10.61 million barrels against forecasts of a gain of 1.89 million barrels.

The decline in U.S. crude oil inventories was mostly triggered by supply cuts led by the Organization of the Petroleum Exporting Countries. The possibility of further supply cuts to extend the oil price rally resulted in oil’s straight gain for eight sessions.

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