The monthly S&P500 Emini futures candlestick chart has not had a pullback in 14 months. This has...
Energy Agency Calls For a Bottom in Oil?
03/14/2016 9:21 am EST
Michael Berger highlights his favorite Energy and MLP stocks after the International Energy Agency said the price of oil may have found a bottom after an unprecedented route over the last 18 months.
The International Energy Agency sent shockwaves throughout the energy market after stating that the price of oil may have found a bottom after an unprecedented route over the last 18 months.
These comments came after the price of West Texas Intermediate and Brent rallied more than 40% off of their February lows. Although this news is exciting, the agency said that this does not necessarily mean that the worst is over.
Selectivity is Key to Success
Although we remain constructive on the domestic oil market and see upside to the current price of oil, investors must be selective when it comes to investing in energy and MLP stocks.
Later this month, OPEC and non-OPEC members are expected to meet to discuss a possible production output freeze. If the meeting goes south and an agreement is not reached, we would expect to see oil give up some of its recent gains.
Domestic Rig Count is at 75-Year Lows
On Friday, the IEA said the number of active oil and gas rigs plunged to the lowest level since Baker Hughes (BHI) started tracking them in 1940. Even though the number of active rigs continues to decrease, production has remained strong due to advancements in drilling technology (horizontal rigs and fracking).
Oil production in the United States has only started to decrease and this leads us to believe that a production freeze agreement is possible.
Commodity Prices Remain a Headwind
While commodity price volatility should continue to act as a headwind, we recommend incorporating energy stocks and MLPs into any diversified portfolio.
Some of the companies that we expect to outperform the market on a longer-term basis are: Concho Resources (CXO), Memorial Resource Development (MRD), Halliburton (HAL), Baker Hughes, Inc. (BHI), Occidental Petroleum Corp (OXY), Tesoro Logistics LP (TLLP), and Enterprise Product Partners (EPD).
By Michael Berger, President and Founder, Technical420.com
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