Shares of Halliburton (HAL) and Baker Hughes (BHI) broke out into buy range Monday, helped by a rally in oil prices, with rival Schlumberger (SLB) closing in on its own entry point.
U.S. crude jumped 3.1% to settle at $51.35 per barrel, the highest finish since July 2015. Brent was up 2.3% to $53.14, also the highest in more than a year. Providers of oilfield services are expected to be the early beneficiaries of the oil rally.
Halliburton shares climbed 2.2% to close at 47.26 in the stock market today, breaking out of a cup base with a 47 buy point. Baker Hughes rose 1% to $53.35, topping a 52.93 buy point from a flat base.
The uptick in oil prices comes as top producers met in Istanbul to discuss the production cuts agreed on last month. The Organization of the Petroleum Exporting Countries agreed to cap production at 32.5 million to 33 million barrels a day, down from the cartel's daily production of 33.2 million barrels at the end of August. Details on who will cut and how much will be decided at OPEC's official meeting in November.
As OPEC cuts back, U.S. drilling is expected to increase next year. Rigs in operation will average 579 for 2017, up 29% from what's expected this year, according to a study out last month by Platts RigData, a forecasting unit of S&P Global Platts. Analysts forecast 11,151 new wells to be drilled next year, up 25% from the 8,915 wells expected this year.
IBD'S TAKE: Oilfield service providers aren't the only stocks breaking out this Columbus Day. Broadcom joins Facebook, Zimmer Biomet and a lesser-known Chinese IPO on a list of stocks exploring new buy zones.
Earlier this year, Baker Hughes and Halliburton called off their merger; the merged company would have overtaken Schlumberger as the world's largest provider of oilfield services.
Meanwhile, Schlumberger stock is still in a cup with a 84.07 buy point. Shares rose 1.25% to 82.33 Monday.
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