The high oil prices due to the Iran conflict are lifting oil-related stocks, per Goldman Sachs.
Goldman strategist Neil Mehta dropped a tidy list Monday afternoon, highlighting 10 Buy-rated stocks where he sees above-average upside at $75 per barrel for Brent (BZ=F) crude oil.
Considering oil prices may remain elevated above that level in the near term, the stocks may prove to be a gusher as investors position for bumper profits.
“Our list reflects four key themes,” Mehta explained. “First, a bullish long-term view of oil (normalized $75/bbl Brent), supporting long-dated inventory value for global oils/services companies such as ConocoPhillips (COP), Cenovus Energy (CVE) and Halliburton (HAL). Second, a more positive tilt on US exploration and production given valuation risk/reward, including execution winners such as Ovintiv (OVV), Permian Resources (PR) and EQT Corporation (EQT).”
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“Third, positive views on the electrification theme and the future of utilities capex, including Power REIT (P8P.F) and Vistra Corp (VST),” he added. “Fourth, underappreciated idiosyncratic, smaller cap stories where we see upward bias in the risk/reward skew for shares at current levels in Par Pacific (PARR) and Golar LNG Limited (GLNG).”
The 10 Buy-rated ideas have at least 20% upside potential from current levels, Mehta said. Vistra is pegged with the most upside potential at 37%.
Goldman’s calls on oil stocks come at a precarious time for world oil markets.
Over the past five days, oil prices have undergone a volatile relief-and-retreat cycle as the market reacted to shifting geopolitical developments in the Middle East.
After peaking near $120 a barrel during the height of Operation Epic Fury, prices plunged sharply early last week. WTI crude (CL=F) fell about 13%, and Brent crude dropped to approximately $94.26 by Friday night following the announcement of a temporary ceasefire.
However, as of today, that downward trend is reversing again amid the collapse of high-level peace talks over the weekend. And President Trump’s order to blockade Iranian trade through the Strait of Hormuz is now in effect.
Oil prices spiked to $103 per barrel on Monday.
“The US Navy is laying a naval siege on the Iranian economy. Cut off their revenues. Cut off their imports. Starve the regime financially. Force them back to the table — this time without the nuclear card,” Yahoo Finance Trader Talk podcaster and investing expert Kenny Polcari said in a note.