3 Best Oil Industries For 2016

Standing on the threshold of 2016, if you have an appetite for ‘energy’ stocks in a choppy market, you ought to first screen the industries from the broader energy sector for the prized catches.

Several studies and historical data have proven that average stocks belonging to top-performing industries have a greater probability of outperforming the ‘blue-chips’ in a relatively poor-performing industry. And what best way to narrow down your search than to resort to some expert advice – in this case the Zacks Industry Rank.

Before going to the stocks from the thriving industries, we need to predict the oil price in the coming year after analyzing the commodity price movement in the past. This is because crude primarily determines the fate of the oil companies.

Will Oil Recover in 2016?

Before analyzing how oil will behave in 2016 we need to know the commodity price movement in the past. Investors regularly tracking the energy sector know that the industry has been witnessing weak crude prices for more than a year. This weakness is primarily due to oversupply of the commodity in the midst of lackluster global demand.

Here’s a quick recap on the history of crude oversupply. During 1990 and early 2000, the U.S. was more dependent on crude import as domestic demand was far above its conventional oil supply. But with the invention of new techniques like hydraulic fracturing and horizontal drilling, U.S. shale producers ramped up oil production relentlessly. Eventually, owing to the huge scale of crude output, U.S. started relying less on oil import.

The shale boom turned the U.S. into an oil surplus economy from a crude deficit region. Along with the U.S., the Organization of the Petroleum Exporting Countries (OPEC) – the international cartel of oil producers – also pumped up more crude. All these events led to a global oversupply of the commodity and pushed oil to its multi-year low marks.

It is a known fact that crude weakness started from the second half of 2014. During January to June 2014, West Texas Intermediate (WTI) crude traded over $100 per barrel many times. But from Aug 2014 plummeting oil started upsetting the market heavily. Since then, the market has not seen recovery of the commodity till now.