Amid weak fundamentals that have kept the price of West Texas Intermediate crude (WTI) at embarrassing levels for over a year, an improvement was noted on Thursday. The big question now is what prompted the spike in the price of WTI crude, which recently touched the lowest level of $29.93 per barrel since Dec 2, 2003, especially since supply remains plentiful and demand lacks luster.

Short Covering

Since mid-2014, the market has been witnessing a freefall in crude prices owing to an oversupplied commodity market.

Investors should note that in reality, a war for market share has been raging among the likes of the Organization of the Petroleum Exporting Countries (OPEC), the U.S. and Russia. Each of these markets has been pumping hard and competing for market share, completely ignoring the downtrend in oil price. This further weakens crude fundamentals.

All the events led crude to touch a level this week that wasn’t seen in the last 12 years. As a result, some investors thought that is the time to make some profit through short covering believing that there aren’t enough forces left to take the commodity down to a large extent. By definition, short covering indicates the purchase of commodities which have already been sold short.

Short-sellers who shorted oil futures at higher prices earlier where waiting for crude to go down further to book profit buying back the futures. But after oil touched the record low level they decided to make some profit by short covering. Hence, by buying back the crude futures the price of oil started recovering. Owing to this, WTI crude rose 2.4% to $31.20 per barrel on the New York Mercantile Exchange yesterday.  

However, the probability of Iranian oil flood in an already oversupplied market and weak fundamentals capped the long-awaited gain in crude price.

5 Prominent Picks

Naturally the companies having positive correlation with oil prices will gain. The firms are oil and gas exploration and production players along with the drilling and oil field services firms. The oil field services players assist the upstream players to efficiently use the wells to pump out oil.

In details, the upstream players sell raw crude to refiners and midstream players. So the higher price will definitely help them to increase their revenue figures. Also, the drillers and oilfield services firms are expected to get more contracts from upstream players following an improvement in crude. With this perception, the related players moved up on the NYSE.

Here, we have highlighted five huge gainers on an improved oil price courtesy of the short covering. Moreover, these stocks are backed by a favorable Zacks Rank, which makes them worth a look.

Key Energy Services Inc. (KEG -Snapshot Report): Houston-based Key Energy is a leading oil field services firm that includes maintenance and completion of oil wells. The company is also a provider of fluid maintenance services.

On Thursday , the company surged more than 68% and has a Zacks Rank #2 (Buy), implying that the stock will outperform the broader U.S. equity market over the next one to three months.  

North Atlantic Drilling Ltd. (NADL - Snapshot Report): Hamilton, Bermuda-based North Atlantic Drilling is the provider of offshore drilling services. Most importantly, the company’s technologically advanced drilling fleet is able to work in harsh environments.

The driller carries a Zacks Rank #2 and jumped more than 37% on the NYSE on Thursday.

CARBO Ceramics Inc. (CRR - Snapshot Report): Houston-based CARBO Ceramics provides resin-coated sand proppants. These are utilized for hydraulic fracturing operations for obtaining natural gas and oil from the wells.

The company surged 23.43% on the NYSE and has a Zacks Rank #2.

Linn Co, LLC (LNCO - Snapshot Report): Houston-based Linn Co is involved in the development of oil and gas resources. This upstream player also carries a Zacks Rank #2 and climbed almost 8% on Thursday.

Linn Energy, LLC (LINE - Snapshot Report): Houston-based Linn Energy – again with a Zacks Rank #2 −is involved in the development of oil and gas resources. The upstream player jumped over 5% in Thursday’s trading session.