Several top U.S. oil stocks traded in or near buy ranges Wednesday as crude oil prices rose amid OPEC+ production disruptions.
XDiamondback Energy (FANG), EOG Resources (EOG), Pioneer Natural Resources (PXD), and Diamondback subsidiary Viper Energy Partners (VNOM) are all in buy ranges. While Matador Resources (MTDR) is near a buy point.
Oil prices rallied Wednesday. Europe's Brent crude benchmark rose 1.3% Wednesday to settle at $84.79 per barrel. U.S. crude gained 2% to $82.82. Natural gas futures soared 13.3%.
"Oil is breaking up into stochastically overbought areas and making up for lost momentum that was taken away with omicron scares," Phil Flynn of the Price Futures group wrote in his morning note. "Growing oil shortage fears are creeping back in as OPEC fails to deliver and despite promises of more U.S. production, the math between supply meeting demand is just not adding up."
Major Gasoline Stockpile Increase
The U.S. Energy Information Administration reported a 4.6 million barrel drop in domestic crude supplies for the week ended Jan. 7. Gasoline supplies surged higher by 8 million barrels. Analysts polled by S&P Global Platts expected a 1.6 million barrel drop in crude supplies and a 3 million barrel increase of gasoline stockpiles.
Data from the American Petroleum Institute, released late Tuesday, estimated a draw of 1.1 million barrels of oil and a build of 10.86 million barrels of gasoline supplies.
On Tuesday, the EIA delivered a bullish view on global oil demand in its latest Short Term Energy Outlook. But it also expects supply to increase. It sees U.S. oil production averaging a record-high 12.4 million barrels per day in 2023.
"We expect global demand for petroleum products to return to and surpass pre-pandemic levels this year, but crude oil production grows at a faster rate in our forecasts," said EIA Acting Administrator Steve Nalley. "We expect that as crude oil production increases, inventories will begin to replenish and help push prices lower for gasoline, jet fuel, and other products in the short term."
U.S. Oil Stocks In Buy Range
Among top U.S. oil stocks, Diamondback shares closed up 0.2% to 124.57 on the stock market today. That put the U.S. shale producer beyond a buy range after breaking out of a consolidation with a 117.81 entry point.
EOG edged up 0.6% to close at 102.77. The stock is still above a buy range after breaking out of a cup base with a 98.30 entry point. The buy range extended to 103.22.
The stock has a 99 Composite Rating. The Composite Rating compiles scores on key fundamental and technical metrics: earnings and sales growth, profit margins, return on equity, and relative price performance. Investors should focus on stocks with a Composite Rating of 90 or higher. EOG is also the top-ranked stock in IBD's Oil & Gas-U.S. Exploration & Production group.
Pioneer closed up 0.5% to 204.91. PXD stock is a buy after climbing past its 196.74 buy point. Its buy zone extends to 206.58.
Viper Energy ran up 1% to close at 26.30. The limited partnership is near the top of a buy range after breaking out of a cup base on its weekly chart with a 25.42 buy point.
Matador jumped 3.3% to close at 43.27. The stock is rising toward a 47.33 entry point in a 12-week cup base.
The market's current status is improving, but investors should remain cautious while making purchases. After several days of deterioration, the Nasdaq rebounded from a test of support from its 200-day line on Tuesday. But the market's status remained "uptrend under pressure. That means buying even leading stocks — even oil stocks — breaking out of valid bases can be riskier than usual.
OPEC+ Members Oil Output Misses Targets
Meanwhile, production disruptions overseas are boosting oil prices, as well as oil stocks.
"Of course, omicron offers some demand uncertainty over the coming months, but the market is tight as OPEC+ slowly turns the taps back on," wrote Craig Erlam, a senior market analyst at Oanda in a note Tuesday. In addition, the fact that "OPEC (is) struggling to deliver on targets doesn't help alleviate any of that tightness in the market. Prices could remain elevated for some time yet."
OPEC+, made up of Organization of the Petroleum Exporting Countries member countries and top-producing nonmembers like Russia, agreed earlier this month to continue attempting to boost production by 400,000 bpd in February. But so far members are failing to hit production targets.
In December, OPEC only increased production by 90,000 bpd, according to Bloomberg figures. Producers faced issues loading cargo in Nigeria. And Libya continued repair work on a major pipeline.
The recent unrest in Kazakhstan, a partner country in the extended OPEC+ group, has also rattled oil prices.
But order is beginning to return as President Kassym-Jomart Tokayev this week nominated, and parliament quickly approved, a new prime minister. Troops from Russia and the Russian-led Collective Security Treaty Organization are expected to leave by the end of the week.
On Sunday, Chevron (CVX) — the last of the oil stocks listed on the Dow industrials, and which has operations at the Tengiz field, said that it was slowly reviving production toward normal levels.
Follow Gillian Rich on Twitter for energy news and more.
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