As oil prices suffered a second year of steep declines, some savvy investors are looking to cash in if crude makes a major comeback in 2016.
“The terrible performance for oil stocks this year came as West Texas crude fell another 30%, following the decline of 39% from June 26, 2014 through the end of that year, and shows how short a year can be when you’re trying to play a commodity rebound,” MarketWatch
“With oil showing its worst 18-month decline since 1986, Chris Kimble of Kimble Charting Solutions pointed out that over the past three decades, after 18-month declines of 45% or more, oil has tended to rise by 42% over the next 12 months, trading positively 98% of the time,” Philip van Doorn writes.
With that in mind, van Doorn offered 9 stocks in the S&P 500 energy sector with “buy” ratings from at least 70% of analysts polled by FactSet:
- Anadarko Petroleum Corp. APC
- EQT Corp. EQT
- Baker Hughes Corp. BHI
- Newfield Exploration Co. NFX
- Halliburton Corp. HAL
- Pioneer Natural Resources Co. PXD
- Marathon Petroleum Corp. MPC
- Schlumberger NV SLB
- Valero Energy Corp. VLO
Oil prices steadied on Thursday but were still headed for a second year of steep declines after a race to pump by Middle East crude producers and U.S. shale oil drillers created an unprecedented global glut that may take through 2016 to clear, Reuters
Global oil benchmark Brent and U.S. crude's West Texas Intermediate (WTI) futures were on track finish 2015 down more than 30 percent after another year that showed the helplessness of Saudi Arabia and others in the once-powerful Organization of the Petroleum Exporting Countries (OPEC) to support oil prices.
The U.S. shale industry, meanwhile, surprised the world again with its ability to survive rock-bottom crude prices, churning out more supply than thought, even as the sell-off in oil slashed by two-thirds the number of drilling rigs in the country from a year ago.
The United States also took a historic move in repealing a 40-year ban on U.S. crude exports to countries outside Canada, acknowledging the industry's growth.
"You do have to tip your hat to the U.S. shale industry and their ongoing ability to drive down costs and hang in there, albeit by their fingernails," said John Kilduff, a partner at Again Capital, an energy hedge fund in New York.
Morgan Stanley said in its outlook for next year that "headwinds (are) growing for 2016 oil." The bank cited ongoing increases in available global supplies, despite some cuts by U.S. shale drillers.
"The hope for a rebalancing in 2016 continues to suffer serious setbacks," the bank said.
WTI for February delivery increased 6 cents to $36.66 a barrel at 11:03 a.m. on the New York Mercantile Exchange. The contract lost $1.27 to $36.60 on Wednesday. Total volume traded was 55 percent below the 100-day average. Prices have decreased 12 percent in December.
Brent for February settlement advanced 39 cents to $36.85 a barrel on the London-based ICE Futures Europe exchange. Prices are down 36 percent this year, a third consecutive annual loss. The European benchmark crude, which has averaged a $4.62 premium to WTI this year, traded at a 19-cent premium to New York futures.
The gap between Brent and WTI has shrunk amid speculation the removal of a 40-year ban on U.S. crude exports may ease the nation’s oversupply. But with the spread at parity or negative, shipments into the U.S. will probably remain elevated, which may create storage problems on the Gulf Coast during the first half of 2016, Citigroup Inc. said in a research report on Wednesday.
"There’s a lot of oil in tanks and we will have to see stockpiles start to decline in a major way before prices recover," Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, told Bloomberg
(Newsmax wire services contributed to this report).
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