XEC - Morgan Stanley upgrades FANG Valero in 'sustained rally' for oil stocks

Market conditions are ripe for a sustained rally for U.S. oil E&Ps in 2021, Morgan Stanley analysts say, projecting Brent crude prices will rebound to $55/bbl by H2 2021 and concluding that many E&Ps finally have the capital discipline required to take advantage of that environment."Not only are E&Ps potential outsized beneficiaries of 'reopening,' but structural changes underpin a new value proposition: competitive, through-the-cycle FCF generation," the firm says.Stanley upgrades Diamondback Energy (FANG) to Overweight from Equal Weight, and Murphy Oil (MUR) and Range Resources (RRC) to Equal Weight, with respective price targets of $61, $14 and $7.In addition to the upgrades, Stanley names Diamondback, ConocoPhillips (COP) and Cimarex Energy (XEC) as its top E&P picks.In the refining space, valuations look reasonable but not yet compelling; the firm upgrades Valero (VLO) to Overweight and HollyFrontier (HFC) to Equal Weight, with respective $74 and $34 price targets, while cutting PBF Energy (PBF)

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Morgan Stanley upgrades FANG, Valero in 'sustained rally' for oil stocks