U.S. oil prices surged past $75 per barrel on Monday, marking a significant technical milestone and approaching August highs. This increase comes as tensions escalate in the Middle East. Israel is weighing its response to Iran, with its oil facilities potentially becoming targets after last week’s missile strikes. As oil prices rise, a number of oil stocks are becoming increasingly attractive for investors.
West Texas Intermediate (WTI) oil prices climbed nearly 4% to $77.27 per barrel on Monday, following a 9% gain the previous week. Speculation arose last week that Israel might target Iran’s oil infrastructure. Additionally, Hurricane Milton is heading toward Florida, raising concerns over Gulf of Mexico production.
Brent crude, the global benchmark, rose above $71 per barrel on Monday. President Biden mentioned last Thursday that he was “discussing” the possibility of U.S. support for Israel’s actions, which pushed oil prices up by 4%. However, on Friday, he stated that “Israelis have not concluded what they’re going to do in terms of a strike” and suggested they should consider alternatives to targeting oil fields.
Israel is planning its response to what the Wall Street Journal described as “one of the largest ballistic-missile barrages in history,” launched by Iran against Israel. Research from the Washington Post revealed that several rockets evaded defenses and hit targets in Israel.
In the oil market, Bloomberg reported that traders were hedging against possible supply disruptions in the Middle East. Some traders have placed bets on $100-per-barrel crude, while U.S. oil prices and Brent prices remain down approximately 10% and 8% year-to-date, respectively.
Earlier this year, West Texas Intermediate reached its peak near $87 per barrel in April, briefly hitting nearly $84 in the summer. However, it fell below $66 in early September, affecting oil stocks as well. Now, stocks may be on the verge of a recovery.
The Impact of Middle East Tensions on Oil Prices
Oil prices have risen due to the direct engagement between Iran and Israel. Concerns are growing that Israel may target Iran’s oil production and export facilities, which are vital for Iran’s economy. There are also fears that U.S. sanctions against Iran could limit or completely halt its oil exports, removing a significant portion of global oil supply.
Iran’s oil production has doubled over the past five years, rising from around 2 million barrels per day in 2019 to approximately 4 million bpd today. Exports were nearly nonexistent in 2019, but under relaxed regulations from the Biden administration, they now stand at about 2 million bpd.
China is reportedly the only major buyer of Iranian oil, which is primarily heavy crude suited for diesel production. A loss of Iranian oil would force China to compete for alternative sources, likely driving prices higher.
The Biden administration faces a dilemma: sanctioning Iranian oil exports or supporting an Israeli strike could push oil prices higher just before the November presidential election.
Oil Stocks Ready for Growth
Several oil stocks are trending upward in tandem with rising oil prices and are now seen as actionable investments. Key players in the S&P 500 include Valero Energy (VLO), Diamondback Energy (FANG), Marathon Petroleum (MPC), and APA (APA), which gained between 6% and 10% last week.
APA is attempting to reclaim its 50-day moving average, signaling a potential buying opportunity. EOG Resources (EOG) and Matador Resources (MTDR) are also positioned to break above downward trendlines, offering early entry points for aggressive investors. Meanwhile, Viper Energy (VNOM) is bouncing back from support at its 10-week moving average. Diamondback Energy (FANG) rose 2.7% to $199.86 on Monday, slightly above a buy point of $199.26.
Focus on Major Oil Companies
Among larger oil companies, Chevron (CVX) is viewed as actionable as the market opens on Monday, having gained 3.6% last week. Exxon Mobil (XOM) saw a significant jump of 7.8% during the same period.
Schlumberger, now known as SLB, has moved past resistance at its 10-week line. Halliburton is testing its 10-week moving average. Investing at this juncture suggests confidence in oil prices maintaining or increasing their momentum.
Baker Hughes (BKR) advanced by 4% last week and is trading within a buy zone from a traditional buy point of 37.14. Its weekly chart shows a 39.05 entry from a cup base, according to MarketSurge charts.
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