What happened

Oil and gas stocks sizzled today, thanks to a surprise forecast from the Organization of Petroleum Exporting Countries (OPEC). Some of the lesser-known stocks surged the most on Sept. 13, with the following leading the pack as of 2 p.m. EDT.

  • Centennial Resource Development (PR -0.40%): Up 6.6%.
  • Vermilion Energy (VET -2.24%): Up 11.2%.
  • Helix Energy Solutions (HLX -1.66%) Up 12.9%.
  • Tellurian (TELL -11.02%): Up 14.2%.
  • Comstock Resources (CRK): Up 10.5%.

So what

All eyes were on OPEC's monthly oil market report, scheduled for Sept. 13, to gauge where demand for oil could be headed. Here are the key highlights from OPEC's report:

  • Global oil demand in Q3 remained resilient.
  • Oil demand in Q4 could fall, clouded by rising delta-variant COVID-19 cases.
  • Oil demand in 2021 is estimated to be 96.7 million barrels per day (BPD), up slightly from OPEC's previous outlook of 96.6 million BPD.
  • 2022 will mark the recovery for the oil industry.
  • Oil demand is projected to grow by 4.2 million BPD in 2022, up a whopping 900,000 BPD from OPEC's August forecast.
  • Oil demand in 2022 could average 100.8 million BPD, exceeding pre-pandemic levels.

The last takeaway is the most important and what primarily sent oil stocks soaring today, as until last week, industry experts expected OPEC to cut its 2022 oil demand forecast in the wake of rising COVID-19 cases.

OPEC's strong demand forecast comes amid tight oil supply as a significant portion of oil production in the Gulf of Mexico remains offline nearly two weeks after Hurricane Ida. With Tropical Storm Nicholas now heading toward the Texas oil hub, fears of further disruption in oil supply loom large.

Workers on an oil field.

Image source: Getty Images.

Given the backdrop, investors in upstream oil stocks such as Vermilion Energy and Centennial Resource Development are unsurprisingly excited. Higher oil prices mean more money for these oil producers, which they can then use to produce more oil to meet higher demand. That also means better prospects for oil-field service companies such as Helix Energy. Last quarter, Helix Energy downgraded its 2021 revenue outlook to $635 million at the midpoint from previous midpoint guidance of $662.5 million, representing roughly 13.5% drop over 2020 revenue.

Hurricane Ida also hit production of natural gas at a time when the U.S. typically builds inventories ahead of the winter months. As per the U.S. Energy Information Administration's weekly report, released on Sept. 9, natural gas inventories in the U.S. for the week ended Sept. 3 was 16.8% lower year over year and 7.4% below the five-year average.

With supply dwindling and demand rising, natural gas prices climbed more than 5% today. The Henry Hub price has doubled in just one year and is hovering around $5.20 per million British thermal units as of this writing. Investors expect the natural-gas market to remain tight and therefore bid shares of natural-gas producers, especially intriguing stocks such as Tellurian, higher.

Now what

With Nicholas posing yet another threat, oil and gas production from the Gulf may not bounce back anytime soon. That'll likely keep crude oil and natural gas prices -- and investor interest in oil and gas stocks -- on strong footing.