Oil Above $80: 2 Energy Stocks You Don't Want to Miss

Fresh Middle East tensions, following the news that the United States has threatened to use its navy to block Iran’s maritime trade for an unspecified period, have renewed investor interest in the oil-energy space. With oil again in its glorious days, should investors bet on Patterson-UTI PTEN and Cactus, Inc. WHD? Let’s dive in.

Oil Price Remains High

West Texas Intermediate (“WTI”) is currently trading above $80 per barrel, according to data from Oilprice.com, significantly higher than the shut-in and breakeven prices for existing wells in key resources. The escalation of Middle East conflicts has been aiding the rally in commodity prices.

In its latest short-term energy outlook, the EIA projects the WTI spot price to average $88.88 per barrel this year, a level that should remain supportive of upstream operations, as many producers have considerably lower breakeven costs. With higher exploration and production activities, demand for oilfield services and drilling activities is also expected to improve.

2 Stocks to Buy: PTEN & WHD

Patterson-UTI is expected to continue gaining from the prevailing crude-price scenario. This is because demand for the company’s services will likely remain robust, as the supportive commodity-price backdrop is expected to continue to bolster exploration and production operations. In other words, with increased exploration and production activities, upstream players will hire more drilling and completion services that will boost the bottom line of PTEN, which currently carries a Zacks Rank #2 (Buy).

Being a manufacturer of highly engineered pressure-control and spoolable-pipe technologies, Cactus is well-positioned to gain on the highly favorable crude pricing environment. This is because the Zacks Rank #2 company’s products and technologies support the drilling, completion and production of onshore oil and gas wells. Also, WHD’s handsome backlog reflects future cash flow generation. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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