Will lower oil prices impact the stock market?

According to Cowen and Company, West Texas Intermediate (WTI) could drop as low as US$ 90 by the end of this year, which would be great for US drivers who have been paying US$ 3/gal. for nearly 2 years. There are however a number of key points that could be game changers such as two large pipelines that are to be completed by the end of the year and more supply in to the market in 2014. Due to Cowen’s predictions, it is clear that specific areas of the oil industry will benefit as well as others in the wider economy, including refiners, transportation stocks airlines and retailers. Below are the top eight companies whose stocks are good to buy in these sectors.

Tesoro Corp.

One of the top names in refining. The company have however suffered since the spring but the fall in oil prices could save them. The target price for Tesoro stock is US$ 60 and closed on Monday at US$ 45.57.

Marathon Petroleum Corp.

Another top refining name, which has possible substantial growth on the horizon. Marathon has a diversified business that operates through refining and marketing, speedway and pipeline transportation segments. Marathon owns and operates seven refineries in the Gulf Coast and Midwest regions of the US, which refine crude oil and other feedstocks and distribute refined products through barges, terminals and trucks, as well as purchases ethanol and refined products for resale. The consensus price target is approximately US$ 79.50, it closed on Monday at US$ 67.19.

FedEx Corp.

The company would see good gains to the bottom line if its fuel costs dropped by 10% and the company and its Smartpost segment witnessed an 11% rise year on year recently.

United Parcel Service Inc.

This company also stands to gain from falling fuel costs. The target for stock is set at US$ 97 and closed on Monday of this week at US$ 90.36.

US Airways Group Inc.

This group is likely to benefit in two ways from lower energy costs. Jet fuel is a major component of airline costs and lower gasoline prices puts more money into consumers’ pockets for discretionary spending and travel.

Costco Wholesale Corp.

This company would benefit again from falling gasoline prices meaning consumers having more money to spend. The consensus stock price stands at US$ 123 and closed at US$ 116.26 on Monday.

Target Corp.

If gas prices fall, it is expected that this retailer will have an exceptional Christmas shopping period as once again consumers will have more cash to spend.

TJX Companies Inc.

This is the final retail group in the list and will benefit from more consumer cash due to lower gasoline prices once again. The consensus stock price is US$ 60 and closed at US$ 56.19 on Monday.

Conclusion

The benefits from a fall in crude oil prices could be incredible. Cowen have estimated that a fall to US$ 90 could redirect more than US$ 71 billion in consumer spending from gasoline to discretionary items (as illustrated above). 

Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/15102013/lower_oil_price_and_stocks751/