The price of oil is coming back up a little but there are still oil stocks to sell. The Street offers its opinions.
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The steep decline in oil prices over the last year has forced oil companies to pull back on investments in production. The number of oil rigs operating in the U.S. has continued to drop and is now at the lowest level since 2010, according to oil services company Baker Hughes(BHI). Even though brent crude oil prices have risen to roughly $65 a barrel — a high for 2015 — and U.S. West Texas Intermediate crude oil was just above $57, close to a six-week high, oil companies are still getting crushed. Here’s 10 large-cap oil-related companies you should sell right now if they’re in your portfolio — with the worst performing companies at the end of the list — using TheStreet Ratings, TheStreet’s proprietary ratings tool.
Smart stock investing always requires fundamental analysis in order to determine the intrinsic value of a stock. The Street offers its propriety tool to determine which oil stocks to sell. Factors include worldwide supplies, demand in North America, Asia and Europe and political stability in oil producing regions.
Fracking and Oil Supplies
The oil fracking boom in the USA has been responsible for the USA returning to the top ranks of oil producers. Oil reserves in the USA are at historically high levels, which drives prices down. The Saudi’s are not cutting back on production as they do not want to lose customers on one hand and they do not want to lend a helping hand to their arch enemy Iran on the other. The Wall Street Journal notes that despite a recent surge in prices oil drifts lower as investors realize that enthusiasm has gotten ahead of common sense.
Oil prices wavered Monday, then settled lower, amid uncertainty about the strength of the recent price rally. Light, sweet crude for June delivery settled down 16 cents, or 0.3%, at $56.99 a barrel on the New York Mercantile. Brent crude, the global benchmark, fell 45 cents, or 0.7%, to $64.83 a barrel on the ICE Futures Europe exchange.Prices have rallied more than 30% since hitting a six-year low in mid-March, but analysts say the market remains oversupplied and prices could be due for a pullback. “The energy markets have gotten ahead of the actual data,” saidMichael Corcelli, chief investment officer at Alexander Alternative Capital LLC. For prices to rally, he said, “we need firmer demand and some type of tangible supply response.”
Until Things Settle Down in the World
Russia annexed part of Ukraine and is supporting separatists in other parts. Sanctions by the USA and Europe are hurting Russia but it is unclear if Russia will change its behavior and if sanctions that hurt its oil industry are going to get better. Iran has sort of agreed to cut back its nuclear industry to guarantee that it will not produce a nuclear bomb, but negotiations are not over yet. If Russia is able to drill more, produce more, and sell more, it will continue to drive the price of oil down. Likewise if Iran is able to export again it will keep prices in the low range. According to Newsweek Iran is being courted by Europe in expectation of sanctions being lifted.
“In downtown Tehran, the German electronics powerhouse Siemens AG opens and closes for business each day. But since 2010, no new business has been done there. “You walk in the door and the staff will tell you, ‘We are keeping the office open until the Iranian sanctions are lifted,’” says Michael Tockuss, managing board member of the German-Iranian Chamber of Commerce Association, in Hamburg, Germany. “People forget that many companies, like Siemens, have a history with Iran that goes back more than 100 years. They stick to the rules, but they keep up the relationship.”
If you are wondering which oil stocks to sell, keep track of the negotiations with Iran over its nuclear program and any lifting of sanctions.