Oil prices have rebounded lately, buoyed by significant demand and a supply crunch owing to the impact of Hurricane Ida. These industry tailwinds should drive the performance of fundamentally strong energy stocks Cimarex (XEC) and National Fuel Gas Company (NYSE:NFG). However, given the continued threat to demand from the COVID-19 pandemic, we think financially weak stocks EQT Corporation (NYSE:EQT) and U.S. Energy (USEG) are best avoided now. Read on for a discussion of all four names.According to the data released by the Energy Information Administration, fuel demand has reached its highest level since March 2020, propelling oil prices to a 10% gain last week. Furthermore, Hurricane Ida is expected to keep crude and retail gasoline prices elevated as refineries remain shut across the region. Consequently, analysts estimate gasoline prices will rise 5 -10 cents per gallon by the Labor Day weekend.
Thus, we think fundamentally sound energy stocks Cimarex Energy Co. (NYSE:XEC) and National Fuel Gas Company (NFG) could soar in price in the near term.
However, the resurgence of the COVID-19 cases is expected to make oil prices volatile in the near term. Thus, we recommend avoiding fundamentally weak energy stocks EQT Corporation (EQT) and U.S. Energy Corp. (USEG).