Oil At 2016 Highs: 5 Energy Stocks Making Most Of The Trend
Zacks Investment Research | May 25, 2016 11:34PM ET
Oil prices are hovering close to the psychological $50 per barrel mark and we feel the time has come for the long beleaguered sector to come back to life. Since mid-2014, the commodity’s price has been plunging primarily due to excess supply of crude in the global market. However, the wheel of fortune is slowly turning for the space which witnessed the 12-year low mark of $26.05 per barrel for West Texas Intermediate (WTI) crude in mid-February this year. This is remarkable considering the fact that the overall market sentiment usually veers toward profit booking prior to the Memorial Day weekend.
Rebound in the Cards?
The upside in this space is mainly driven by lower production from the non-OPEC space. The International Energy Agency (IEA), the OECD energy watchdog, is also bullish on the demand growth prospects of the trio – India, China and Russia. Per the agency, the triad consumed about 1 million barrels per day more year over year in the first quarter of 2016.
Our bullishness is further compounded by the latest weekly data from the Energy Information Administration (EIA) that revealed a fall in U.S. crude stocks as imports dropped and refineries cut output. The optimism was also echoed by the American Petroleum Institute (API) – the largest oil industry association in the U.S.
As a result, investors' hopes were rekindled on oil and the commodity, which is showing overall improvement after touching the lowest point in mid-February. Also, the domestic oil count stopped the southward march last week when it stopped a steady eight-week fall, as revealed by Baker Hughes Inc. (NYSE:BHI) .
We feel the correction in rig count is a blessing in disguise for the beleaguered energy space. This is due to the simple fact that over the past decade, the space has seen a mammoth rise in drilling and production related capacities. This resulted in an invariable rise in production levels. However, the correction in rig count clears the path for stability in the space.
Recovery at the Right Time
The current change in demand-supply dynamics put energy players on radar of investors long awaiting a lift in the fortunes of the space. So long, the sector was ravaged by falling realizations from upstream operations which dragged down the overall picture. The downfall continues to affect the performance of even the largest players in the space like Royal Dutch Shell (LON:RDSa) plc Zacks Investment Research
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