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5 Top-Rated Stocks to Buy as Oil Prices Post-Record Gains

U.S. crude price posted its largest single day gain since Dec 1 following an unexpectedly large decline in the supply of domestic crude. The increase comes after recent declines which saw prices falling through several technical levels. Concerns over the efficacy of OPEC’s output control actions had led to a series of reverses.

Meanwhile, the group of oil exporting countries and other key producers of the commodity are slated to meet later this month. It is being widely speculated that OPEC will likely extend its output reductions into the remainder of 2017. Such a move could lead to a shortfall in supply, thus pushing up prices. This is why it would be extremely prudent to invest in oil stocks at this time.

Crude Prices Gain on Decline in Inventories

Oil prices gained after the Energy Information Administration (EIA) reported a bigger-than-anticipated drawdown in crude barrels. For the week ended May 56, domestic supplies from crude decline below the 5.2 million barrel mark, according to the EIA. This figure was lower than the forecast of 5.8 million which the American Petroleum Institute had released late on Tuesday.

However, the EIA’s reading exceeded the forecast released by S&P Global Platts, which is the outcome of an analysts’ poll. More importantly, this was the sharpest weekly decline for the year, according to the EIA. As a result WTI crude prices gained $1.45, or 3.1%, to reach $47.33 a barrel. This is a notable rebound, given that prices had declined to levels like $43.76 only recently.

Also, Brent crude prices gained $1.49, or 3.1% to reach $50.22. This was the first time this week that Brent crude prices touched the $50 mark. The demand for gasoline increased by 252,000 barrels a day, nearly in line with levels witnessed last year. The increase is particularly significant given recent weekly declines in consumption levels.

IEA Weighs in on OPEC Cuts Extension

A meeting among OPEC members slated for May 25 is keenly awaited by those who track the industry. It is being widely speculated that OPEC and other key oil producing countries such as Russia will extend the output reductions currently in force into the latter half of this year. According to the International Energy Agency’s (IEA) Neil Atkinson, a deficit in oil supply already exists and this will deepen further if the oil exporting bloc does indeed extend production cuts.

The IEA’s head of oil analysis delivered such a prognosis on Wednesday, speaking at the Platts Crude Oil Summit held in London. Atkinson said the current OPEC agreement had tackled the crude oversupply problem to some extent. He said that a supply deficit has become evident at the beginning of the second quarter and was likely to intensify if OPEC did indeed decide to extend its production controls. 

Our Choices

Oil prices have staged a notable rebound following the recent drop in crude stockpiles. A pickup in gasoline demand is likely to provide further upside to the commodity. With OPEC widely expected to extend its output reductions, oil is likely to have a better time in 2017. 

Picking select stocks gaining from these trends looks like a smart option at this point. We have narrowed down our search based on a Zacks Rank #1 (Strong Buy) and other relevant metrics. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Par Pacific Holdings, Inc. PARR manages and maintains interests in energy and infrastructure businesses. The company's operating segments consist of refining, retail and logistics.

Par Pacific’s projected growth for the current year is more than 100%. Its earnings estimate for the current year has improved by 3.9% over the last 30 days.

China Petroleum & Chemical Corp. SNP or Sinopec is one of the largest petroleum and petrochemical companies in Asia. 

Sinopec’s projected growth for the current year is 60%. Its earnings estimate for the current year has improved by 2.4% over the last 30 days.

Canadian Natural Resources Ltd. CNQ is an independent oil and natural gas exploration, development and production company based in Calgary, Alberta.

Canadian Natural Resources’ projected growth for the current year is more than 100%. Its earnings estimate for the current year has improved by 58% over the last 30 days.

Gran Tierra Energy Inc. GTE is an international oil and gas exploration and production company, headquartered in Calgary, Canada, incorporated and traded in the U.S. and operating in South America.

Gran Tierra Energy’s projected growth for the current year is more than 100%. Its earnings estimate for the current year has improved by more than 100% over the last 30 days.

Penn Virginia Corporation PVAC is an oil and gas company engaged in exploration, development and production of oil, NGLs and natural gas.

Penn Virginia’s projected growth for the current year is more than 100%. Its earnings estimate for the current year has improved by 32.8% over the last 60 days.

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