Energy ETFs & Stocks Surge on Norway Strike & Delta Hurricane

Oil price is on track for the biggest weekly gain since May driven by a Norway strike and Hurricane Delta that has threatened output. Both U.S. crude and Brent are up around 10% this week, marking the first rise in three weeks.

Norway Strike

A strike by oil workers in Norway could cut output from western Europe’s biggest oil and gas producer by almost a quarter by Oct 14 (read: Top & Flop ETF Zones of First Nine Months of 2020).

The dispute began on Sep 30 when wage talks between the Lederne union and the organization representing oil companies collapsed. However, the first production outages began on Oct 5. According to the Norwegian Oil and Gas Association, six offshore oil and gas fields were shut on Oct 5. This has reduced output capacity by 8% or around 330,000 barrels of oil equivalent per day (boepd). U.S. oil major ConocoPhillips (COP) planned shutdown of its Ekofisk 2/4 B platform, with output of 7,000 billion boepd, on Oct 10 if the strike continues. Six more oil and gas fields could fully or partly close by Oct 14, including the Ekofisk platform.

The biggest outage would be at Equinor’s Johan Sverdrup oilfield, the North Sea’s largest oilfield with an output capacity of up to 470,000 barrels of oil per day. Overall, 941,000 boepd are expected to go offline so far. The Norwegian Oil and Gas Association expects the extended strike to cut 25% of production.

Hurricane Delta

The hurricane Delta has forced to shut down nearly 1.5 million barrels per day (bpd) of oil output in Gulf of Mexico. It has halted nearly 90% of the Gulf of Mexico’s crude output.

Saudi Arabia View

Per The Wall Street Journal, Saudi Arabia is considering the cancellation of plans for the Organization of the Petroleum Exporting Countries (OPEC) to raise oil production early next year. It cited that the rise in COVID-19 cases in many parts of the world and the expected return of Libyan crude oil to the world market threatens to swell global supplies.

The oil price surge led to smooth trading in the energy space. We have highlighted the five best ETFs & stocks that gained the most over the past week and will continue to head higher with the rise in oil price (read: 4 Best S&P 500 Sectors of Q3 and Their Top ETFs).

Best ETFs

While these are among the best performers over the past week, they lag the broader markets significantly. Our ranking system takes into account the asset class outlook, which was negative for energy and hence most of the ETFs in the space have a #4 (Sell) or 5 (Strong Sell) Zacks Rank.

Invesco S&P SmallCap Energy ETF PSCE – Up 14.2%

This fund provides exposure to the U.S. small-cap segment of the energy sector by tracking the S&P Small Cap 600 Capped Energy Index. It holds 38 stocks in its basket with AUM of 13.2 million. The fund trades in average daily volume of 47,000 shares and charges 29 bps in fees per year. It has a Zacks ETF Rank #5 with a High risk outlook (read: Here's Why Small-Cap ETFs Are Hitting New Highs).

First Trust ISE-Revere Natural Gas Index Fund FCG – Up 13%

This fund offers exposure to U.S. stocks that derive a substantial portion of their revenues from the exploration and production of natural gas. It follows the ISE-REVERE Natural Gas Index and holds 44 stocks in its basket. The fund has amassed $66.8 million in its asset base while charging 60 bps in annual fees. Volume is good with 651,000 shares exchanged per day on average. FCG has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

Invesco Dynamic Energy Exploration & Production ETF PXE – Up 12.1%

This product follows the Dynamic Energy Exploration & Production Intellidex Index, which thoroughly evaluates companies based on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action and value. Holdings 31 stocks in its basket, the fund has amassed $14.1 million in its asset base while trading in average daily volume of 21,000 shares. It charges 63 bps in annual fees and expenses and has a Zacks ETF Rank #5 with a High risk outlook.

SPDR S&P Oil & Gas Exploration & Production ETF XOP – Up 12%

This fund provides exposure to oil and gas exploration companies by tracking the S&P Oil & Gas Exploration & Production Select Industry Index. It has amassed $1.8 billion in its asset base and holds 41 securities in its basket. The product charges 35 bps in annual fees and trades in average volume of 6.6 million shares per day. It has a Zacks ETF Rank #3 with a High risk outlook.

First Trust Energy AlphaDEX Fund FXN – Up 11.2%

This ETF follows the StrataQuant Energy Index. It holds 41 stocks in its basket with AUM of $112.4 million and average daily volume of 1.7 million shares. The product charges 65 bps in annual fees and has a Zacks ETF Rank #5 with a High risk outlook.

Best Stocks

We have highlighted the best-performing stocks that currently have a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Comstock Resources Inc. CRK – Up 20.5%

This independent energy company is engaged in the acquisition, development, production and exploration of oil and natural gas properties. It saw positive earnings estimate revision of a penny over the past 30 days for this year and has a market cap of $1.23 billion. The stock has a Zacks Rank #2 and a Value Score of A.

Southwestern Energy Company SWN – Up 19.1%

This company is engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids in the United States. With a market cap of $1.7 billion, it has a Zacks Rank #3 and a Value Score of A.

Range Resources Corporation RRC – Up 19%

This independent oil and gas company is engaged in the exploration, development and acquisition of oil and gas properties, primarily in the Appalachian Basin and North Louisiana. The stock saw positive earnings estimate revision of couple of cents over the past month for this year and has a market cap of $2 billion. It has a Zacks Rank #2 and Momentum Score of A.

Noble Midstream Partners LP NBLX – Up 16.4%

It is engaged in crude oil and natural gas exploration and production. The stock saw solid earnings estimate revision of $1.42 over the past month or this year. With a market cap of $770 million, it has a Zacks Rank #3 and Value Score of A (see: all the Energy ETFs here).

Targa Resources Inc. TRGP – Up 15.2%

It is a leading provider of integrated midstream services in North America and primarily derives its revenues from gathering, compressing, treating, processing and selling natural gas. It has a market cap of $3.8 billion. The stock has a Zacks Rank #3 and Value Score of A.

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Comstock Resources, Inc. (CRK) : Free Stock Analysis Report
 
Southwestern Energy Company (SWN) : Free Stock Analysis Report
 
Range Resources Corporation (RRC) : Free Stock Analysis Report
 
Targa Resources, Inc. (TRGP) : Free Stock Analysis Report
 
First Trust Energy AlphaDEX ETF (FXN): ETF Research Reports
 
First Trust Natural Gas ETF (FCG): ETF Research Reports
 
Invesco Dynamic Energy Exploration Production ETF (PXE): ETF Research Reports
 
Invesco SP SmallCap Energy ETF (PSCE): ETF Research Reports
 
SPDR SP Oil Gas Exploration Production ETF (XOP): ETF Research Reports
 
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