US Oil Rig Count Sees Biggest Rise In 2016: 4 Energy Picks

In its latest weekly release, Houston-based oilfield services company Baker Hughes Inc. (BHI - Analyst Report) reported the biggest weekly rise in 2016 for the U.S. oil rig count. Per the company, oil rigs engaged domestically rose to 325 for the week ended Jun 3, 2016. This was up by nine from the previous week’s tally of 316.

Ray of Hope
We feel any recovery in rig count is a blessing in disguise for the beleaguered energy space. After all, the rise came after an uneventful OPEC summit last week that failed to agree on a production freeze. However, a rising rig count points to increased utilization and thus stability, if not an immediate recovery, in prices.

Crude Chaos?  

The crude space has been in utter chaos over the past two years. The market was also stressed by a dearer greenback and weaker spot prices for domestic crude as a glut weighed on supplies. As of now, the commodity is taking a breather thanks to a host of macro issues round the globe including production disruption in Canada due to the Alberta wildfires, militant attacks and the threat of a nationwide strike in Nigeria, the political rout in Venezuela, and reduced shale production in the U.S.

West Texas Intermediate (WTI) crude price is currently hovering around $48 per barrel, less than half the price of the commodity during the mid-2014 level, when oil was trading above $100 per barrel.

Inventory Still High

As per the U.S. Energy Department's latest inventory release, at 535.70 million barrels, current crude supplies are up 12% from the year-ago period and at the highest level during this time of the year. This increase comes despite the third inventory decline in four weeks. The federal government’s EIA report revealed that crude inventories decreased by 1.37 million barrels for the week ending May 27, 2016, following a decline of 4.23 million barrels in the previous week.

How to Make a Choice?

The energy sector has gone haywire with the crude carnage. On top of that its wide array of players are muddling up investors' stock picking power. This is where the Zacks methodology could offer some relief. One could narrow down the list using our VGM score. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows investors to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score.

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