Last week saw a big upward movement for oil prices. Benchmark West Texas Intermediate (WTI) touched $109.32 a barrel — the highest level since March 2012. Crude has gained nearly 18% since June, and the run-up may not be over yet.
You can credit several catalysts for this latest advance, including a sharp drop in inventories.
[ad#Google Adsense 336×280-IA]According to the Energy Department, stockpiles at the massive Cushing, Oklahoma storage hub dropped 882,000 barrels recently to 46.1 million.
That’s the thinnest inventory since last November.
Additionally, traders are reacting positively to news that China’s central bank is taking steps to loosen lending and stimulate economic activity.
So we’ve got bullish news from both the supply and demand sides.
I typically invest in oil and natural gas producers with strong growth trajectories.
These companies don’t necessarily depend on rising commodity prices to juice the bottom line because their production volume is rising swiftly — still, triple-digit prices will only sweeten cash flows.
More importantly, sustaining these lofty levels will provide ample financial incentive for upstream oil producers to boost their exploration and development budgets. So I’m looking at sectors that will be on the receiving end of that spending, from equipment vendors to offshore drillers. One stock to consider is Petroleum Geo Services (OTC: PGSVY), an undervalued seismic surveyor with a deep customer base.
— Nathan Slaughter