2 Top-Ranked Energy Stocks to Ride Oil's Rally Above $80

Oil prices are climbing again as the Iran war intensifies. This is creating opportunities for investors willing to allocate capital to the oil-energy space that has witnessed a strong rally of 30.6% over the past year, outperforming the Zacks S&P 500 composite’s increase of 21%. Given the favorable backdrop, should investors bet on Patterson-UTI PTEN and TechnipFMC FTI? Let’s dive in.

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High Oil Price

West Texas Intermediate (“WTI”) oil is currently trading above $80 per barrel, according to data from Oilprice.com, significantly higher than the shut-in prices for existing wells in key resources. The escalation of Middle East conflicts has been aiding the rally in commodity prices.

In its latest short-term energy outlook, the EIA projects the WTI spot price to average $76.26 per barrel this year, a level that should remain supportive of upstream operations, as many producers have considerably lower breakeven costs. With higher exploration and production activities, demand for oilfield services and drilling activities is also expected to improve.

2 Energy Stocks to Bet on: PTEN, FTI

Patterson-UTI is expected to continue to gain from the prevailing crude-price scenario. This is because demand for the company’s drilling and completion services will likely remain robust, as the supportive commodity-price backdrop is expected to continue to bolster exploration and production operations. In other words, with increased exploration and production activities, upstream players will hire more drilling and completion services that will boost the bottom line of PTEN, which currently carries a Zacks Rank #2 (Buy).

TechnipFMC, being a leading provider of technology, equipment and services to the upstream players for extracting resources efficiently while reducing costs, is well-positioned to capitalize on the high oil prices. With exploration and production activities remaining favorable, demand for FTI’s services is likely to continue growing. With its activities spreading across Subsea and Surface Technologies, the company, with a Zacks Rank of 2, is strongly positioned to gain from both onshore and offshore operations. 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).

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