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Homemarket insiderDrilling stocks are rising as oil leaps on hopes of an OPEC...

Drilling stocks are rising as oil leaps on hopes of an OPEC deal

Energy stocks led U.S. markets higher Wednesday as oil prices surged on hopes that a deal from OPEC may cut back production.

Oil drilling stocks, or those focused on exploration and production, were the best performers in the sector. Oklahoma City-based Devon Energy leaped more than 13.5 percent in morning trade, while Marathon Oil and Transocean climbed more than 10.5 percent, and Diamond Offshore Drilling rose 9 percent.

Shares of Helmerich & Payne were about 5 percent higher.

"At this point, if this (OPEC deal) is true, this is definitely a bullish perspective for all oil stocks, especially upstream," the exploration and production companies, said Luana Siegfried, energy equity research associate at Raymond James.

Reports indicated that OPEC struck a deal in Vienna on Wednesday, though the cartel had yet to make any formal announcement as U.S. markets opened.

U.S. oil futures for January delivery briefly leaped more than 8 percent to above $49 a barrel, their highest since Nov. 22. Brent crude futures for January delivery climbed above $50, their highest since late October.

"For all E&P stocks, this is a bullish call for sure, because price is directly correlated with cash flow," Siegfried said. Raymond James expects U.S. crude to reach $60 by the end of the year, and the firm has a strong buy rating on Marathon Oil and an underperform rating on Exxon Mobil.

Oil prices were higher after a source said the Organization of the Petroleum Exporting Countries had agreed on a plan to cut output based on an outline hammered out in Algiers in September, Reuters said.

Earlier, crude prices had already climbed after Saudi Arabia's energy minister, Khalid al-Falih, said OPEC members were "getting close to a deal" on a potential production cut. Oil prices have lost more than half their value since 2014 due to oversupply.

If a deal is struck, analysts forecast that oil could rise to $50 a barrel and above, but if not, it could drop to $40 or below.

However, as oil prices recover the benchmark $50 level, that could encourage a revival of U.S. shale oil production. The weekly U.S. oil rig count rose by three to a total of 474 last week, versus 555 a year ago, according to Baker Hughes.

The Energy Select SPDR Fund ETF (XLE) climbed more than 3.5 percent in morning trade, while Dow components Exxon Mobil and Chevron rose about 2 percent or more. Shares of oilfield services giant Baker Hughes gained more than 3.5 percent.

U.S. stocks hit record highs in Wednesday morning trade.

— CNBC's Patti Domm contributed to this report.

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