Oil Climbs on OPEC's Big Supply Cut, Energy Names Rally

Defying U.S. pressure, OPEC and its allies including Russia — collectively referred to as OPEC+ — said they have agreed to trim oil output by two million barrels per day (bpd) from November, the most since the group’s historic 9.7 million bpd cut in early 2020 when the pandemic broke out.

Oil Equities Jump

Aided by this agreement, the Energy Select Sector SPDR — an assortment of the largest U.S. companies thronging the space — was easily yesterday's biggest gainer in the S&P 500 standings, with oil stocks comprising three of the five biggest winners on the index. On the New York Mercantile Exchange, WTI crude futures added $1.24 or 1.4%, to settle at $87.76 a barrel, the highest since mid-September. Schlumberger SLB, ExxonMobil XOM and Halliburton HAL were among the day's noteworthy winners.

U.S. Criticizes OPEC+ Move

While black gold firmed up on OPEC+ plans, the decision attracted criticism from several quarters. Expressing displeasure over the cartel’s declaration and accusing it of siding with Moscow, White House press secretary Karine Jean-Pierre said, “It’s clear that OPEC+ is aligning with Russia with today’s announcement."

Ironically, the alliance’s decision came just after the European Union countries agreed on a price cap for Russian oil (to limit Kremlin’s financial gains) in retaliation to the war in Ukraine. From an OPEC+ standpoint, the move could be thought of as a pre-emptive action to prop up crude prices, which recently slipped to a nine-month low of around $77-a-barrel on recessionary fears. Investors should know that the benchmark U.S. oil hit a 14-year high of $130 in March.

Biggest Stock Winners

Coming back to Wednesday’s oil price bounce, Schlumberger was the top-performing S&P 500 stock, with a gain of 6.26%. SLB beat the Zacks Consensus Estimate for earnings in three of the last four quarters. It has a trailing four-quarter earnings surprise of 9.1%, on average.

Schlumberger has a projected earnings growth rate of 57.8% for this year. The Zacks Consensus Estimate for SLB’s 2022 earnings has been revised 9.2% upward over the past 90 days.

ExxonMobil was also among the best performers on the S&P 500 Index, with shares appreciating 4.04% on Oct 5. XOM, carrying a Zacks Rank #2 (Buy), has a projected earnings growth rate of 136.8% for this year.

You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for ExxonMobil’s 2022 earnings has been revised 12.2% upward over the past 90 days. XOM’s expected EPS growth rate for three to five years is currently 23.7%, which compares favorably with the industry's growth rate of 11.9%.

Rounding out the top five, Halliburton was up 4% during the session. HAL has a projected earnings growth rate of 86.1% for this year.

Halliburton, with a market capitalization of $25.5 billion, has a VGM Score of B. HAL beat the Zacks Consensus Estimate for earnings in two of the trailing four quarters, the average being 3.7%.

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