Oil near $100 as Iran conflict enters ninth month, Goldman lists energy picks

Oil is trading at about $100 a barrel as the conflict with Iran enters its ninth month, with Iranian crude exports down to almost nothing while most other Gulf exporters have recovered from their lows, according to CNBC's Power Insider column.

The column, published Oct. 22, says little about the situation is clear beyond elevated prices. Physical barrels are trading well above the roughly $100 "paper" price, in some cases possibly double, it adds. Demand destruction has not arrived yet: prices are up across the board and demand is holding relatively steady, though very high European diesel prices are expected to weigh on consumption eventually.

Shipping, security and Iran's economy

Attacks continue. Multiple ships have been hit in roughly the past week, according to the column, which says the Houthis — described there as an Iranian proxy — recently killed civilians in Saudi Arabia in strikes on an airport and struck part of Aramco's headquarters.

Iran's economy appears to be crumbling, with its currency losing value, the column says. It argues that because oil is Iran's main source of money, a country unable to sell crude has less ability to buy the weapons, drones and missiles that spread fear in the Gulf — and that desperation makes it more dangerous. Shipping costs keep climbing and insurance is available but expensive.

Earnings in focus

Energy services company SLB reports on Oct. 23, followed by Baker Hughes and liquefied natural gas exporter Cheniere Energy. The main event comes on Oct. 30, when ExxonMobil and Chevron report. The column says big sales and refining earnings are likely, but that the real news will be whatever guidance management offers — and it expects little.

Goldman's stock picks

Goldman Sachs analyst Neil Mehta and his team have named 10 energy stocks they favour, after a long stretch of backing refiners. On the large-cap side they highlight ConocoPhillips and Occidental Petroleum, both of which have new chief executives — Andrew O'Brien at ConocoPhillips and Richard Jackson at Occidental. The column says Goldman recently upgraded Occidental to Buy and added it to its "America's Conviction List" with a $69 price target; the shares have gained 53% over the past year.

Smaller names include Permian Resources, which operates in the Delaware Basin in New Mexico and is expected to grow free cash flow by about 20% over the next couple of years, and Canada's TC Energy, whose stock has pulled back. H.F. Sinclair is the only name on the list trading at its median Wall Street price target after a 138% gain in 12 months.

Strategic Petroleum Reserve

The U.S. Strategic Petroleum Reserve keeps falling and is at its lowest level since it was filled. The open question is how low it can go before withdrawals become harder and slower; some observers say the physics of pulling oil out change below 300 million barrels. The reserve, the column notes, is not one facility but a collection of old caves around Texas and Louisiana.

Source: CNBC Top News.