5 Buy-Ranked Oil Stocks That Are Broker Favorites

One thing the oil market downturn has taught investors: nobody has much visibility into the future. So, when you think of something as a clear line of sight one quarter, it can soon be overshadowed by an unforeseen event.

The Unpredictable Nature of Oil Prices

Oil's 2016 journey was marked by sudden sharp sell-offs followed by swift recoveries. However, with crude's wild ride, we saw some big winners — and big losers as well. So essentially, investors with good stock-picking skills made a lot of money, while those who bet on the wrong stocks got absolutely hammered.

By February, prices plunged all the way to a low of $26 per barrel, thanks to the boom in shale oil production and rising output from OPEC. The dramatic slide prompted several analysts to make bold calls on a potential bottom. While some suggested prices might drop as low as $20 a barrel, gloomier estimates called for a sensational $10-per-barrel floor.

But thankfully, none of these bone-chilling forecasts were correct.

A historic OPEC production cut agreement, together with help from non-OPEC producers and slashing investments (in existing and new wells) saw oil prices more than double from their February lows to end the year around $54.

The Recent Sell-Off

For the first two months of 2017, oil prices found themselves locked in a sideways trading range, as the tug-of-war over two powerful, opposing supply narratives continue.

Reports indicated an impressive 90% compliance level from the OPEC producers who pledged output cuts in an effort to tackle the three-year supply glut. However, a burgeoning rig count – pointing to the ever-increasing shale drilling activities – kept prices under check and within a band between $50-$55 a barrel.

And then prices broke below the psychologically important $50 threshold after U.S. government data showed that supplies – building since the beginning of the year – rose to record levels amid an increase in production. At 533.11 million barrels, current crude supplies are up 6% from the year-ago period and are at the highest level since the EIA began keeping records in 1982. Moreover, domestic output has risen to 9.13 million barrels per day, the most since Feb 2016.

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