Oil stocks are having an incredible day in the market today, following up on the massive gains that we’ve seen last week. No matter where you look, Resolute Energy Corp (NYSE:REN), Chesapeake Energy Corporation (NYSE:CHK), Ocean Rig UDW Inc. (NASDAQ:ORIG), and many, many more are flying high today. Below, we’ll talk about what we’re seeing from these stocks, why, and what investors should be watching ahead.
What We’re Seeing From REN, CHK, And ORIG
As mentioned above, Resolute Energy Corp (NYSE:REN), Chesapeake Energy Corporation (NYSE:CHK), Ocean Rig UDW Inc. (NASDAQ:ORIG), and seemingly the rest of the oil sector are extending gains achieved last week. If you’re looking into the oil and energy sector, chances are that you’re seeing green. In the case of REN, CHK, and ORIG, they are currently (2:24) trading at $34.57 per share, $6.34 per share, and $1.47 per share respectively. This comes after respective gains of 11.01%, 6.82%, and 15.74% thus far today.
Why Are Oil Stocks Climbing
The reason we’ve seen big gains in oil recently has to do with OPEC. Months ago, the oil and energy market rallied as OPEC announced that it had reached an agreement to reduce production of the commodity among its members. While the proposed reduction was relatively small, it showed that the world’s largest oil producers were working to come to an agreement to curb supply and allow demand to catch up.
However, shortly following the announcement, we started to see declines in stocks like REN, CHK, and ORIG as investors started to see holes in the story. Unfortunately, the deal has not yet dictated which countries will produce what amounts of oil per day. However, OPEC said that the agreement will be finalized by no later than November 30th. As we get closer and closer to that day, investors are growing more and more excited, leading to gains in the value of oil.
Another factor that’s playing a role in the big gains in oil today is the fact that Russian President Vladimir Putin has spoken out in regard to OPEC. In his statements, he made it clear that he supports the idea of curbing output. While Russia is not part of OPEC, this is an important step to get reluctant OPEC members to sign on. After all, Russia is one of the world’s largest producers.
What I’ll Be Watching For Ahead
In the short run, I’m expecting further excitement to fuel further growth in stocks like Resolute Energy Corp (NYSE:REN), Chesapeake Energy Corporation (NYSE:CHK), and Ocean Rig UDW Inc. (NASDAQ:ORIG). However, in the long run, what happens on November 30th will likely have a massive impact. If Saudi Arabia can’t get the rest of OPEC to sign on and support the deal, we could see massive declines in oil, leading to declines across the energy sector. However, if they can get this deal done, it will likely lead to further massive sector-wide gains!
Note: This article was written by Joshua Rodriguez, owner and founder of CNA Finance. If you would like to connect with Joshua, you can do so by emailing him at CNAFinanceHelp@gmail.com!