EOG: Primed for a Rally with Crude

10/07/2015 9:00 am EST

Focus: STOCKS

Michael Berger

President & Founder, Technical420.com

Investors and traders have bet against rising oil prices due to reports that said global oil production will remain high during 2016, which is why Michael Berger, of Technical420.com, continues to prefer the companies—such as this one—that own premier oil producing acreage in the United States.

Due to an unexpected cut in production around the world, the price of United States crude oil is approaching $50 for the first time since July. This comes after a report was issued by the United States Energy Information Administration (EIA) which said that United States crude oil production fell to 9 million barrels a day during September, the lowest level since September 2014.

From September to August, the EIA reported that production fell by 120,000 barrels a day. The agency cut its production forecast through the end of next year. They expect to see 8.8 million barrels produced a day during 2016. This is consistent with their announcement in mid-September which said they expect United States shale production to decrease by 400,000 barrels a day.

Russia Plans to Meet with OPEC

Oil prices though, are rebounding prior to a meeting between Russia, the world’s largest oil producer, and the Organization of the Petroleum Exporting Countries (OPEC).

Last weekend, Russia’s oil minister said the country is willing to meet with OPEC and other producers. We do not expect to see Russia join OPEC or slow down its production because the county is dependent on higher production to keep its revenue stable. In September, Russia produced 10.74 million barrels a day, a new post-Soviet high.

Where to Find Value 

During the last month, investors and traders have bet against rising oil prices due to reports that said global oil production will remain high during 2016. Large price swings are nothing new for the energy market this year and the market is trying to determine if oil prices have bottomed following a historic rout.

We continue to prefer the companies that own premier oil producing acreage in the United States. One of these companies is EOG Resources, Inc. (EOG), which is down 10% year-to-date. The company owns prime real estate in two of the best oil producing basins in the United States, the Eagle Ford and Bakken. EOG has rallied more than 19% from its lows on September 28 and we expect to see shares rally with the price of crude.

Michael Berger, Founder and President, Technical420.com

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