Permian Oil Stocks Poised to Benefit from Red Sea Supply Risks

The recent Houthi threats around the Bab el-Mandeb strait have raised concerns about global supply, causing shipping lanes to be disrupted by 34% and increasing tensions in the Red Sea.

This has sparked interest in oil stocks that could benefit from tighter supply expectations and higher pricing power. Three large companies with a significant presence in the Permian Basin are Riley Exploration Permian (REPX), Diamondback Energy (FANG), and Permian Resources (PR).

Riley Exploration Permian is an independent oil and gas producer focused on drilling and production in the Permian Basin, with operations concentrated in Yoakum County, Texas, and Eddy County, New Mexico. The company generates all of its revenue from oil and gas exploration and production activities in the United States.

Diamondback Energy is another independent oil and gas producer that focuses on unconventional shale drilling in the Permian Basin, concentrating on liquids-rich formations in West Texas and New Mexico. With a market cap of $55 billion, Diamondback Energy generates revenue from its upstream oil and gas operations within the United States.

Permian Resources is an independent oil and gas producer focused on crude oil and liquids-rich natural gas in the Delaware Basin. The company has large acreage positions in Reeves County, Texas, and Lea County, New Mexico, which it develops through horizontal drilling and completions. Permian Resources generates revenue from exploration and production of oil and natural gas in the United States.

All three companies have a strong presence in the Permian Basin and could benefit from tighter supply expectations and higher pricing power due to increased tensions in the Red Sea.