The oil-energy sector remains in the spotlight after the United States and Iran reached an interim deal last week. Media reports suggest that oil flows through the Strait of Hormuz are recovering, with shipping activity picking up again. Oil prices are declining significantly, altering the business landscape of energy companies.
The price of oil is still significantly higher than the shut-in prices of the wells in the United States that are not new but existing. According to a report from the Federal Reserve Bank of Dallas, the shut-in prices are lower than $50 per barrel in the major resources in the domestic market. Considering the backdrop, should investors bet on Phillips 66 PSX and Nabors Industries Ltd. NBR right away? Let’s delve deeper.
2 Energy Stocks in the Spotlight: PSX & NBR
West Texas Intermediate (“WTI”) oil is currently trading just below $70 per barrel, according to data from Oilprice.com, significantly lower than the more than $100 per barrel reached in May this year. Phillips 66, currently carrying a Zacks Rank #2 (Buy), is likely to gain from the softer crude pricing environment. This is because PSX, a leading refining company, is now able to purchase oil at a lower cost, enabling the production of end products.
Although a leading refiner, PSX, unlike most of its refining peers, has diversified its business across midstream and chemicals. It is to be noted that midstream business, by its very definition, is resilient since it generates stable cash flows as the assets are being utilized for the long term, and is less vulnerable to commodity price volatility. Hence, having a diversified business model, PSX is insulated from the commodity price volatility to a great extent.
Nabors Industries is a leading energy company known for providing drilling technology and services. In the Lower 48, NBR has a large land-rig footprint and exposure in the international market. The current oil prices, which are much lower than the shut-in prices, are likely backing exploration and production activities, which are expected to have a positive impact on demand for NBR’s drilling technology and services. On its first-quarter 2026 earnings call, the #2 Ranked company mentioned that in the Lower 48, it is expecting its rig day rates to rise to the mid-$30,000 range through 2027 from the low-$30,000 range. 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).