Goldman: Here are the stocks set to gain from surging oil prices

Scott Gamm

Oil prices are surging amid production disruptions in Saudi Arabia. That could affect a host of different stocks in the energy space, according to Goldman Sachs strategists.

In a note to clients, Goldman says the companies with “the greatest 4Q19 potential operating cash flow percentage uplift” from rising oil prices include names like Hess (HES), Occidental Petroleum (OXY), Cimarex Energy (XEC) and Apache (APA), among others.

As for the companies with the highest potential “free cash flow yield uplift” for the fourth quarter of 2019, Goldman points to Murphy Oil (MUR) as well as Apache and Cimarex.

Prices for West Texas Intermediate (WTI) (CL=F), the U.S. oil benchmark, surged roughly 10% Monday, crossing $60 a barrel. Though prices are still below the 2019 high of roughly $66 a barrel from late April. Plus, WTI fell over 2% last week —Monday’s gain is coming off of an already depleted basis.

Oil pump jacks work at sunset near Midland, Texas, U.S., August 21, 2019. Picture taken August 21, 2019. REUTERS/Jessica Lutz

Brent, the international oil benchmark, saw prices surge over 10% Monday to just shy of $67 a barrel.

Military strikes hit key crude production facilities in Saudi Arabia over the weekend, curtailing Saudi Arabian oil production by some 5.7 million barrels per day.

“The length of the disruption is unknown,” Goldman analysts noted.

Though some analysts feel the market wasn’t correctly pricing in geopolitical tensions into oil prices

“No matter whether it takes Saudi Arabia 5 days or a lot longer to get oil back into production, there is but one rational takeaway from this weekend’s drone attacks on the Kingdom’s infrastructure – that infrastructure is highly vulnerable to attack, and the market has been persistently mispricing oil, which Citi reckons should have been a good $10 a barrel higher than it has been for months,” Citi analysts wrote to clients in a note.

The developments in Saudi Arabia prompted multiple tweets from President Trump on Sunday, including this one:

“Based on the attack on Saudi Arabia, which may have an impact on oil prices, I have authorized the release of oil from the Strategic Petroleum Reserve, if needed, in a to-be-determined amount sufficient to keep the markets well-supplied.”


Scott Gamm is a reporter at Yahoo Finance. Follow him on Twitter @ScottGamm.

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