The global oil market is currently experiencing an uptick, with brent crude prices hovering above the $84-per-barrel mark, a slight increase of 0.8% from the last trading session. The West Texas Intermediate (WTI) crude also witnessed a 0.9% rise, trading above the $80-per-barrel threshold. This upward trend in oil prices is fostering a bullish atmosphere, paving the way for heightened exploration and production activities, particularly in lucrative shale reserves.

Oil Price Still Remains High

At present, the WTI crude price is trading above $80 per barrel, which is deemed highly beneficial for the exploration and production sector. The U.S. Energy Information Administration’s (“EIA”) short-term energy outlook remains optimistic, projecting an average spot price of $82.15 per barrel for WTI crude for 2024. The current dynamics in the global oil market, characterized by rising prices, robust demand and constrained supply, are setting the stage for an expansion in the upstream sector.

What Led to the Rise in Oil Prices?

The driving force behind the soaring oil prices can be traced to the recent revisions in the EIA’s Short-Term Energy Outlook. Initially, the EIA projected a modest increase in U.S. oil production, anticipating an addition of 170,000 barrels per day (bpd). However, the outlook has been adjusted to forecast more robust growth of 260,000 bpd, culminating in a total daily production of 13.19 million barrels.

Contrary to expectations, this significant upward revision in production forecasts did not exert bearish pressure on oil prices. Instead, the EIA highlighted the ongoing production constraints by the Organization of the Petroleum Exporting Countries, coupled with a strengthening demand. These factors are anticipated to contribute to a tighter oil market, commencing as early as the second quarter of the year.

Further buoying the oil market, the American Petroleum Institute’s inventory estimates indicate a favorable scenario, leading to a subsequent 2% rise in oil futures. This increase is further amplified by market anticipation of potential rate cuts by the Federal Reserve by the summer.

3 Stocks to Buy

Given the backdrop, it is prudent to allocate money toward oil exploration and production companies. We are employing our proprietary Stock Screener to zero in on three stocks belonging to the spaces that are well-poised to gain. The three stocks currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.