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Furthermore, producers signed contracts at much lower oil prices to hedge against the negative oil prices last year. Drilling budgets need to increase 54% to more than half a trillion dollars to avoid a future supply crisis. Recently, President Biden’s administration had called on OPEC to increase supply and asked for cooperation from oil companies to curb price increases.
Given the uncertainties surrounding the oil market, we believe fundamentally weak stocks with bleak long-term prospects, Northern Oil and Gas, Inc. (NOG) and Genesis Energy, L.P. (GEL), are best avoided now. Analysts have recently downgraded these stocks.
