Highly Shorted E&Ps Are Best Positioned To Capture Upside From Drone Attack (OXY) (CHK) (CPE) (OAS)

Morgan Stanley's Integrated Oil analyst, Devin McDermott, believes that the US Exploration & Production sector is best positioned to capture a short term rally in oil prices resulting from the drone attack on critical oil infrastructure that disrupted ~5.7 MMb/d of oil supply in Saudi Arabia. This level of volume amounts to ~5% of the global oil supply but Aramco has indicated that it will make up for the loss of production by supplying customers from its inventory.

Oil prices have rallied >10% during early trading and the analyst stated E&Ps are best positioned within the Energy sector to capture the benefit of a short-term rally in oil prices. E&Ps most likely to lead near term are oil focused with leverage above 2x and/or short interest of 15% or more, including: Occidental Petroleum (NYSE: OXY), Chesapeake Energy (NYSE: CHK), Callon Petroleum (NYSE: CPE) and Oasis Petroleum (NYSE: OAS)".

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