Crude oil prices, which have recently started trading by as much as $80 per barrel during last Friday’s trading session have raised the outlook for energy company stocks leading to numerous analysts giving a buy rating as the prices of oil is expected to go higher in the coming months.
Morgan Stanley (NYSE:MS) forecasted that Brent crude prices may hit $90 per barrel by the year 2020 which would project that prices of the commodity will remain around the $70 to $80 per barrel for a while. Meanwhile, other analysts are expecting crude to hot $100 per barrel in a couple of months.
The numerous upbeat outlook on crude prices raised the positive outlook on the valuation of energy companies and their stocks, which would encourage higher cash flow and an opportunity to stabilize any rocky balance sheet. Analysts have commented on how a growth in free cash flow and the balance sheet of energy companies have contributed to higher valuations in the past especially for energy companies.
By last week, energy stocks were able to record their longest rally in more than ten years with analysts forecasting more room for growth due to the bullish run of crude prices over the last month fueled by U.S. President Donald Trump’s decision to withdraw from a nuclear deal with Iran.
The United States ending a nuclear deal with Iran will bring back heavy sanctions to the country affecting its production and crude oil exports leading to a lesser global supply. This pushed oil prices higher over the past month even prior to Trump’s official decision when the U.S. president hinted his plans to end the deal.
The Organization of Petroleum Exporting Countries has also extended its efforts in stabilizing oil prices as well as helping prevent a global oversupply through a collective agreement to cut daily production. This agreement has been extended by the organization numerous times and is currently set to run until the end of the year.
Oil prices have suffered last year when a sudden and continuous rise in the crude production of the United States raised market concerns on the country’s role in the global oil market as well as on how it has weighed in on various and collective efforts to prevent a global gut.
Just recently, prices of crude products such as petrol and diesel were seen at a record high. Rising oil prices are set to raise the outlook for energy stocks and oil companies in the upcoming weeks or months. Price of Brent crude futures was last seen at around $79.95 per barrel from its previous highs of $80.50 while WTI crude futures added 0.5% to $72.70 per barrel. Crude prices may lose ground later this week when the American Petroleum Institute, as well as the Energy Information Administration, delivers its weekly report. Analysts are currently expecting a decline of around 2.8 million barrels.