What Mixed Oil Inventory Signals Mean for Energy Stocks Now

Energy markets are facing another choppy week as oil prices move lower despite a notable draw in U.S. crude inventories. Conflicting signals from supply data, refinery activity and imports have kept investor sentiment cautious.

At this time, we advise investors to buy stocks such as Phillips 66 PSX, W&T Offshore WTI and Oceaneering International OII, as near-term volatility may create attractive entry points for patient energy-focused investors.

Oil Prices Drift Lower Amid Volatility

Oil prices have been under pressure over the past few days, slipping despite some supportive inventory data. WTI crude traded near the mid-$50s per barrel, while Brent hovered close to $60. Prices declined after the Energy Information Administration (“EIA”) reported a sizable draw in U.S. crude stocks, as markets focused more heavily on rising refined product inventories and surging crude imports. Additional uncertainty surrounding global supply conditions, including developments tied to Venezuelan crude flows, also weighed on sentiment. Overall, recent price action reflects a market struggling to gain upward momentum, even as underlying crude balances show signs of tightening.

Crude Supply Tightness Offers Limited Support

U.S. commercial crude inventories fell by 3.8 million barrels in the latest reporting week, leaving stockpiles about 3% below the five-year average. This draw signals tighter crude availability and would typically support prices. Refinery runs remained strong, with utilization near 95%, underscoring steady demand for feedstock. However, the bullish impact of lower crude stocks has been muted, as investors remain wary of broader supply dynamics and the potential for additional barrels entering the market through higher imports.

Product Oversupply Pressures Margins

In contrast to crude, refined products showed sharp builds. Gasoline inventories rose by 7.7 million barrels and now sit above seasonal norms, while distillate stocks rose by 5.6 million barrels. These increases point to softer end-user demand and may pressure refining margins in the near term. For downstream-focused companies, elevated product inventories can weigh on profitability, even as refinery utilization remains high.

Import Surge Adds Short-Term Supply Pressure

Crude oil imports jumped to 6.3 million barrels per day, up sharply from the prior week. This influx of foreign supply has helped offset domestic crude draws and contributed to the market’s cautious reaction. While imports have averaged lower year over year, the recent spike adds short-term pressure and limits upside for prices.

A Cautiously Optimistic Outlook for Energy Investors

Despite recent price weakness, the underlying data suggest a market working through temporary imbalances rather than a structural downturn. Strong refinery utilization and below-average crude inventories offer a constructive backdrop once product stocks normalize. Volatility is likely to persist, but it can also create opportunity.

3 Energy Stocks to Buy

For investors who can look past short-term price swings, energy stocks still offer selective opportunities. Companies with diversified businesses and efficient operations are better positioned to handle uneven demand and market volatility. In this environment, stocks such as Phillips 66, W&T Offshore and Oceaneering International stand out, as improving fundamentals and disciplined supply growth could support stronger performance ahead.

Phillips 66: It is a diversified energy manufacturing and logistics company headquartered in Houston, TX. Spun off from ConocoPhillips in 2012, the company traces its roots back more than a century. Phillips 66 is one of the world’s largest independent refiners, operating a broad network of refineries primarily across the United States, with additional international exposure. It also markets transportation fuels through thousands of retail and wholesale outlets in North America and Europe.

Beyond refining, Phillips 66 has meaningful exposure to chemicals, marketing, and midstream operations. The company holds a 50% stake in Chevron Phillips Chemical and owns interests in midstream assets that support natural gas, liquids, and refined product transportation. This balanced structure helps smooth earnings across commodity cycles.

Phillips 66’s expected EPS growth rate for three to five years is currently 30.7%, which compares favorably with the industry's growth rate of 17%. This Zacks Rank #1 (Strong Buy) company beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed in the other, the average being 18.3%.

You can see the complete list of today’s Zacks #1 Rank stocks here.

W&T Offshore: The company is an independent oil and natural gas producer with a long-standing presence in the Gulf of America. Public since 2005, W&T Offshore holds working interests in 50 offshore fields across federal and state waters and controls more than 600,000 gross acres. Its asset base features low-decline reservoirs, strong well productivity and substantial remaining reserves, which have helped the company generate positive cash flow for over 28 consecutive quarters.

Founded in 1983, W&T Offshore has grown through targeted acquisitions and disciplined development. This Zacks Rank #2 (Buy) company has completed roughly $2.7 billion in Gulf of America acquisitions since its IPO and maintains a drilling success rate near 90%, supported by deep technical expertise. With reserves of 248 million barrels of oil-equivalent and daily production of 35.6 thousand barrels of oil-equivalent in the third quarter of 2025, WTI continues to focus on cost reductions, reserve life extension and a steady pipeline of organic and acquired growth opportunities.

W&T Offshore beat the Zacks Consensus Estimate for earnings in three of the last four quarters and met in the other, with the average being 27.1%. WTI has a market capitalization of $233.6 million.

Oceaneering International: It is a global technology company that provides engineered services, products and robotic solutions for offshore energy, defense, aerospace and industrial customers. With more than six decades of subsea experience, the company is known for operating in complex and demanding environments where safety and reliability matter most. Its work spans offshore energy projects as well as advanced applications beyond traditional oil and gas.

Oceaneering is increasingly focused on robotics, automation, software, and remote operations. These capabilities help customers inspect, maintain, and manage assets more efficiently while reducing risk. Supported by steady cash generation and ongoing investment in innovation, the company is positioned to support long-term growth across energy and non-energy markets.

The Zacks Consensus Estimate for Oceaneering International’s 2025 earnings per share indicates 68.4% year-over-year growth. This #2 Ranked company beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed in the other, the average being 12.3%.

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This article originally published on Zacks Investment Research (zacks.com).

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