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Oil prices have experienced a significant increase this month, which has positive implications for certain stocks. Top oil exporters Saudi Arabia and Russia announced supply cuts for August, resulting in a rally of crude prices. West Texas Intermediate (WTI) has surged over 14% in July, making it on track for its best monthly performance since January 2022. This also marks the second consecutive positive month for WTI, its longest winning streak since May 2022. Considering these gains, CNBC Pro has identified stocks that are likely to benefit further from the increase in oil prices.
APA, an oil and natural gas producer, has the strongest 50-day correlation with WTI prices of 0.71. This means that as oil prices continue to rise, APA is likely to see gains. The company has experienced a surge of 18.5% in July, although it is still down 13.3% year to date. Analysts are anticipating the release of APA's quarterly earnings on Wednesday.
Devon Energy, another stock on the list, has seen an increase of over 11% this month. It has a 50-day correlation of 0.69 with WTI and an average correlation of 0.59 since 2015. More than half of the analysts covering the stock rate it as a buy or a strong buy, suggesting potential upside for the stock. Devon Energy is set to report its second-quarter earnings on Tuesday.
Diamondback Energy has also experienced a significant increase of almost 12% in July. It has a 50-day correlation of 0.63 with WTI and an average correlation of 0.56 since 2015. Over 86% of analysts covering the stock have given it a buy or strong buy rating, indicating positive prospects. The company will be reporting its quarterly earnings on Monday after the bell.
Pioneer Natural Resources, a Texas-based oil company, has a 50-day correlation value of 0.65 with WTI Crude. The stock has gained 9.3% this month and is down less than 1% in 2023. A managing partner at DCLA named Pioneer Natural Resources as "part of a core portfolio." Half of the analysts covering the stock rate it as a buy, with an estimated additional rally of 10.3%. Pioneer Natural Resources will release its second-quarter results on Tuesday.
In conclusion, the recent increase in oil prices presents favorable opportunities for certain stocks in the oil and natural gas sector. Companies such as APA, Devon Energy, Diamondback Energy, and Pioneer Natural Resources have all shown significant gains this month and have strong correlations with rising oil prices.
For a new business looking to enter the energy sector or invest in oil-related industries, this development could be seen as a positive signal. The surge in oil prices indicates increased demand and potential profitability for companies engaged in oil production and exploration.
By carefully studying the performance of these stocks and conducting thorough market research, a new business could potentially identify opportunities to capitalize on this upward trend in oil prices. However, it is crucial to consider other factors and conduct comprehensive risk assessments before making any investment decisions.
Moreover, the impact of oil prices on various industries extends beyond the energy sector. Higher oil prices can lead to increased costs for transportation, manufacturing, and other sectors reliant on oil-derived products. Therefore, it is essential for a new business to consider the potential indirect effects of rising oil prices on their operations and adjust their strategies accordingly.
In conclusion, while the recent surge in oil prices provides potential opportunities for certain stocks in the oil and gas industry, it is important for a new business to conduct thorough research and analysis before making any investment decisions.
Article First Published at: https://www.cnbc.com/2023/07/31/oil-is-headed-for-its-best-monthly-gain-in-more-than-a-year-how-to-trade-it.html