Crude oil prices have been rising lately amid production cuts by major oil-producing nations. On the other hand, the energy demand is increasing consistently. These factors are expected to drive the demand for energy services.
Amid this backdrop, it could be wise to buy fundamentally strong energy stocks Halliburton Company (HAL – Get Rating), Matrix Service Company (MTRX – Get Rating), and ChampionX Corporation (CHX – Get Rating), given their massive potential for gains.
Before diving deeper into the fundamentals of these stocks, let’s discuss why the energy services sector is well-positioned to grow.
Crude oil prices had climbed above $100 per barrel last year due to worries over the lack of supply caused by the war between Ukraine and Russia. Prices have risen lately after cooling during the early part of the year, crossing $90 a barrel for the first time since November 2022. Surging demand primarily led to the price increase. Global oil demand rose by 3.26 million barrels per day during the second quarter of 2023 to reach 103 mb/d.
While crude oil prices are now trading below $90, tighter oil supplies by the end of this year due to supply cuts by OPEC+ and Russia could push crude oil prices above $90 again. Moreover, the conflict between Israel and Hamas poses a risk of the dispute spilling over to neighboring oil-producing nations like Saudi Arabia, which could further drive oil prices higher.
Exploration and production (E&P) companies increased their capital expenditure during the second quarter. This and rising energy activity could boost the demand for energy services. JP Morgan believes Brent oil prices, a benchmark for international crude oil prices, will likely touch $150 per barrel due to robust demand and diminishing supplies.
Global electricity demand is forecasted to grow between 62% and 185% by 2050 when compared to 2021 levels. The EIA estimates that U.S. power generation from renewables will rise from 21% in 2021 to 44% in 2050. However, oil is expected to remain the largest energy source, just ahead of renewables.
With the dependence on oil unlikely to stutter anytime soon, energy companies offering services related to oil and gas drilling, evaluation, production, maintenance, etc., will likely perform well. The global oilfield services market industry is projected to reach $421.31 billion by 2030, growing at a CAGR of 5.6%.
In light of these encouraging trends, let’s look at the fundamentals of the three promising Energy – Services stocks, beginning with number 3.
HAL provides products and services to the energy industry worldwide. It operates in two segments: Completion and Production and Drilling and Evaluation.
On June 12, 2023, HAL announced that…
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