The energy sector has been a hot button topic for months. The big development has been the further collapse of crude oil prices and its impact on energy shares overall.
Crude oil prices have now slipped below $75 per barrel, the lowest level in the past four years. The main cause for the recent decline is the higher-than-expected production and rising inventories. The Energy Information Administration recently announced that U.S. crude oil production surged about nine million barrels per day in November, the highest production level in decades.
In comparison, Russia produced 10.1 million barrels per day in 2013, while Saudi Arabia produces an average 9.7 million barrels per day. I wouldn’t be surprise to see the U.S. surpass both Saudi Arabia and Russia soon. What’s interesting is that the U.S. is not the only North American country producing more oil. Canada and Mexico have both started producing more oil. So right now, North America is energy independent.
Given the increase in production here in the U.S., it’s not surprising that crude oil is piling up. Crude oil stockpiles increased by 2.6 million barrels to 381.1 million barrels in the week ended Nov. 14. That was well above expectations for stockpiles to fall by one million barrels.
Along with rising production and increasing stockpiles, there are at least three other factors putting downward pressure on crude oil prices — namely, the strong U.S. dollar, lackluster seasonal demand and higher-than-anticipated gasoline inventories. While the cold start to the winter in much for the U.S. will boost natural gas demand, which could help support energy prices, we won’t have a good handle on when crude oil prices will stabilize until the spring.
So, it would have been and continues to be smart to reduce exposure to the energy sector. Examples of energy stocks to sell are Schlumberger Limited. (SLB), EOG Resources Inc (EOG), Cimarex Energy Co (XEC) and Nabors Industries Ltd. (NBR). In the current energy industry climate, it simply isn’t worth fighting the analyst community, which has been reducing its bottom-line forecast for most energy-related companies.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
