Commodity Cycles and Oil Producers

Commodity Cycles and Oil Producers

August 27th marked National Petroleum Day, the day people worldwide can unite to avoid and limit using petroleum-based products like gasoline, plastics, and surprisingly even some makeups for the day. One day may just be a ‘drop in the bucket’ for this commodity, because it actually moves in cycles. 

Analysts have suggested we are in a commodities super-cycle, a prolonged period of price increase in commodity markets. Increases in commodities can have a negative effect on inflation, which does not seem to be going away anytime soon. Since the outbreak of the war between Russia and Ukraine, the market has seen rallies in nearly all commodity markets, like oil, grains, precious metals, and industrial materials. Recent commodity supercycles always begin with a rise in the price of oil, the world's most traded commodity. Amid the 2008 financial crisis, the U.S. stock market plunged 20% from its high, while commodities-related stocks reached record highs. 

In this article, we’ll focus on 2 small-cap and 2 large-cap oil and which stocks Deshe Analytics’ AI-based research projects to have the strongest likelihood of benefiting or struggling going forward. 

 

  • Plains GP Holdings (NASDAQ: PAGP) | $2.7B Market Cap

Plains GP Holdings owns and operates midstream energy infrastructure in the United States and Canada. The company engages in the transportation of crude oil and NGLs (Natural Gas Liquids) on pipelines, gathering systems, and trucks. According to their recent financial report, which was published August 9th, several impressive financial metrics make them more attractive than their peers, and earned them total score of 82/100 and a Buy recommendation (to read full report).

When trying to optimize the timing of an investment, it's critical to analyze whether the stock looks overbought or oversold, and in which direction the momentum is moving. Looking at Plains GP Holdings technical analysis signals, the stock is now priced above its 5-day, 50-day, and 200-day moving average, while its MACD (moving average convergence divergence) indicates that the stock's price movement momentum is strengthening. Historically, this is a positive setup in the near, medium, and long term. In particular, many institutional investors keep close watch of the 200-day moving average. The company is trading near it's 12-month high, which signals an attack on the resistance price. Meanwhile, looking at the Stochastic Oscillator and RSI (relative strength index), Plains GP Holdings, L.P's stock indicates that it's likely oversold. Overall, these technical indicators signal positive upward momentum. Therefore, this stock received a Bullish TA (technical analysis) score of 83/100.

  • International Seaways (NYSE: INSW) | $1.5B Market Cap

International Seaways owns and operates a fleet of oceangoing vessels for the transportation of crude oil and petroleum products in the international flag trade. The company’s financial reports for Q2, filed on August 9th, showed some exciting results. It generates impressive and balanced results that reveal its underlying strength, not only in terms of value but also due to its impressive growth and income factors. These above-average results make a strong case overperformance and for anticipating significant upside potential. Correspondingly, International Seaways received a ranking of 93/100 and a Strong Buy recommendation (to read full report).

International Seaways's stock is now priced above its 50-day and 200-day, but below its 5-day moving average, while its MACD indicates that the stock's price movement momentum is also strengthening. Overall, these technical indicators signal positive upward momentum. Therefore, this stock received a Bullish TA score of 73/100.

  • Enterprise Products Partners (NYSE:CQP) | $58.7B Market Cap 

Enterprise Products Partners L.P provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, petrochemicals, and refined products. At a high level, the metrics from Enterprise Products Partners’ Q2 financial report, published on August 9th, were demonstrably negative. Their growth, value, and income factors indicate a poor execution and strategy, which isn't generating exciting growth. These results indicate a weak growth potential for Enterprise Products Partners L.P's stock price moving forward. Therefore, we assessed them with a rating of 55 and an Underperform recommendation (see full report).

Like Plains GP Holdings above, Cheniere Energy Partners’ stock is now priced above its 5-day, 50-day, and 200-day moving average. Therefore, this stock received a Bullish TA score of 78.

 

  • Cheniere Energy Partners (NYSE:CQP) | $26.7B Market Cap

Cheniere Energy Partners, through its subsidiaries, owns and operates natural gas liquefaction and export facility at the Sabine Pass liquefied natural gas (LNG) terminal located in Cameron Parish, Louisiana. The Q2 financials published by Cheniere Energy Partners on August 4th were weak and discouraging. Their growth and income factors indicate a poor execution and strategy, which isn't generating exciting growth. These results suggest a challenging future for Cheniere Energy Partners’ stock. As such, Cheniere Energy Partners received an overall score of 55/100 and an Underperform recommendation (see full report).

However, looking at technical indicators for traders, traders might be looking for an opportunity since Cheniere Energy Partners’ stock is priced above its 5-day, 50-day, and 200-day moving average. Its MACD indicates that the stock's price movement momentum is strengthening, which historically is a positive setup in the near, medium, and long-term. Meanwhile, looking at the Stochastic Oscillator and RSI (relative strength index), Cheniere Energy Partners’ stock indicates that it's likely oversold. Overall, these technical indicators signal positive upward momentum. Therefore, this stock received a Bullish technical analysis score of 78/100. 

Last, commodities are considered to be assets that don't generate any income but instead are traded on the basis of their future value. This means that they're heavily influenced by supply and demand, which can be especially volatile in periods of political instability and supply chain disruptions. 


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