U.S. oil prices moved up above $75 per barrel on Monday, clearing a key technical hurdle and nearing an August high, as tensions in the Middle East continue to escalate. Israel is contemplating a response to Iran, with the country's oil facilities a possible target as it considers a response to last week's missile barrage. With oil prices advancing, a range of oil stocks appeared to be actionable Monday.
West Texas Intermediate (WTI) oil prices jumped nearly 4% to $77.27 per barrel on Monday, adding to a 9% gain from last week. Late last week, reports swirled that Israel would target Iran's oil infrastructure. Meanwhile, Hurricane Milton barreled towards Florida on Monday, threatening Gulf of Mexico production.
Brent futures, the international benchmark, moved above $71 per barrel on Monday.
On Thursday, President Biden told members of the press at the White House that he was "discussing" whether the U.S. would support such an action. Oil prices moved 4% higher on the comments.
Then on Friday, Biden told the press that "Israelis have not concluded what they're going to do in terms of a strike" and that "if I were in their shoes, I'd be thinking about other alternatives than striking oil fields."
Israel has been charting its response to what the Wall Street Journal called "one of the biggest ballistic-missile barrages in the history of warfare," launched by Iran on Tuesday against Israel. Research from the Washington Post showed two dozen of those rockets evaded alliance defenses, finding targets on the ground in Israel.
Meanwhile, Bloomberg reported last week that some oil traders were hedging against supply disruptions in the Middle East with a number of $100-per-barrel crude calls traded this week. U.S. oil prices and Brent prices remain down around 10% and 8%, respectively, on the year.
West Texas Intermediate hit its high for this year just below $87 per barrel in April. An early summer rally sent it briefly to a high near $84 per barrel. WTI has since lagged, dropping below $66 in early September and as a result, oil stocks have also lagged. But they could now be looking to make a comeback.
The Oil Price Link
Oil prices have climbed as Iran and Israel have clearly crossed the line into direct engagement. Oil markets worry that Israel could choose to damage Iran's oil production, transport or export facilities, aiming to sever the country's most critical source of revenue.
Another fear is that the U.S. will sanction Iran and limit or reduce or end completely its oil exports. Either move would remove a substantial portion of global oil supply.
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Iran's oil production has doubled over the past five years, from around 2 million barrels per day in 2019 to around 4 million bpd currently. Exports were near zero in 2019. Under relaxed Biden Administration rules, exports have increased to around 2 million bpd.
China is reportedly the only major buyer of Iranian oil, which is generally heavy crude, well-suited to producing diesel fuel. Consequently, loss of Iranian exports would send China out to bid against buyers for other sources of oil, pressuring prices higher.
The Biden administration's quandary is that sanctioning Iran oil exports (or an Israeli strike) would mean driving oil prices higher just ahead of the November presidential election.
Oil Stocks Poised To Take Off
Several oil stocks are tracking, along with oil prices, higher and are now actionable.
Oil-specific names showing strength on the S&P 500 include Valero Energy, Diamondback Energy, Marathon Petroleum and APA. The stocks showed gains ranging from 6% to 10% last week.
APA looked to reclaim its 50-day moving average on Monday, flashing a buy signal.
EOG Resources and Matador Resources are also both poised to cut back above downward trendlines, which could offer aggressive investors early entries.
Meanwhile, Viper Energy is rebounding from support at its 10-week moving average. Diamondback Energy, moved 2.7% higher to 199.86 Monday, just above a double-bottom base buy point of 199.26.
Oil Prices: Exxon Mobil And Halliburton In Focus
Among the industry's largest names, Chevron is actionable heading into Monday's market open. CVX shares gained 3.6% last week. Fellow supermajor Exxon Mobil jumped 7.8% last week.
Exxon Mobil is above a traditional 120.50 buy point in a six-week base pattern. XOM is actionable through 126.53 on the 5% buy zone from that traditional buy point.
Chevron last week severed a downtrend, offering a buying opportunity as it jumped back above its 10-week line. CVX is looking to retake its 40-week/200-day moving average.
ConocoPhillips and Occidental Petroleum both gained more than 8% last week. OXY has advanced in six consecutive trading sessions, closing Friday above its 50-day moving average for the first time since July.
In oilfield services, industry leaders SLB and Halliburton gained 7% and more than 8%, respectively last week.
SLB, formerly, Schlumberger, is climbing past resistance at its 10-week line. Halliburton's chart is similar, but just testing resistance at its 10-week moving average. Buying into those trend line breaks means buying into the idea that oil prices may either hold steady or continue higher. There are various scenarios under which that is not likely.
Meanwhile, Fellow oilfield services firm Baker Hughes advanced 4% last week and is trading in a buy zone from a traditional 37.14 buy point from a cup-with-handle base on a daily chart, according to MarketSurge charts. On a weekly chart, BKR is showing a 39.05 entry from a cup base.
Please follow Kit Norton on X @KitNorton for more coverage.
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