A so-far lousy year for the stock market has been a godsend for oil stocks. Spiking natural gas and oil prices have replenished energy industry balance sheets thinned by the pandemic demand crash. And a steady increase in the number of drill rigs heading to the fields has raised some hope that a bonanza of fresh oil supply could be on the horizon.
That optimism had appeared to receive some support Thursday, as the Organization of Petroleum Exporting Countries boosted its monthly production increase budget by more than 50%, the first such acceleration since August. But a fresh round of rig data on Friday showed that a 10-week advance in drilling activity flattened. At the same time, U.S. oil prices jumped nearly 3%, back above $120 a barrel.
Oil stocks, which have led the stock market’s upside by long strides this year, reacted positively on Friday. At the head of that group, oil and gas drillers posed the top gain through May — up more than 96% — among the 197 industry groups tracked by IBD.
With the group, land rig leaders Patterson Energy (PTEN), Helmerich & Payne (HP) and Nabors Industries (NBR) have all more than doubled in price since the start of the year.
But despite strong capital expenditure increases announced in the first-quarter reporting season, oil and gas companies are unlikely to scale up production operations anytime soon, those close to the industry say. And even as fuel prices remain painfully high for consumers, a closely watched gauge of rig activity due out on Friday will show whether the recent growth in rig activity may already have begun to level off.
Oil Prices, Russia, OPEC
The price of crude oil has been on an upward trajectory since the beginning of last year. Prices angled sharply higher following Russia’s invasion of Ukraine in February, and as global backlash against the invasion shunned purchases of Russian oil. Spot prices for U.S. oil briefly touched $130 in March.
OPEC — concerned about high prices leading to…
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