Market Overview

Will Oil Be The Best Investment Of 2015?

Will Oil Be The Best Investment Of 2015?

Bank of America analysts believe 2015 may be the time for investors to start dipping their toes into oil again.

In a recent report, analysts presented the case for cautiously venturing into oil-exposed energy stocks that have heavily underperformed in 2014 due to the collapse in oil prices.

Related Link: How Oil Prices Are Impacting The Banking Business

Supply And Demand Comes Into Play

The core of Bank of America’s fundamental argument for buying into oil is a simple matter of supply and demand. Analysts argue the crash in oil prices has nothing to do with oil demand, which remains stronger than ever.

Weakness in oil has been, supposedly, entirely due to a glut in supply--mostly due to the huge ramp-up in North American production over the past few years.

Will There Be A Rebound?

WTI crude oil is currently priced at about $63 per barrel, down over 35 percent in the past year.

Bank of America Commodities Strategist Francisco Blanch is predicting a rebound in the price of WTI oil to $72 per barrel in 2015 and $81 per barrel in 2016.

Current Position: Volatile, For Now

Analysts see a continuation of short-term volatility in oil prices for now. OPEC’s recent decision not to make cuts means that oil production is currently exceeding worldwide demand by over a million barrels per day.

This decision by OPEC appears to be a strategic one aimed at driving higher-cost production operations, particularly in North America, out of business. Analysts warn investors to be selective when picking stocks, as not all producers will likely survive the period of volatility.

Look To Large-Cap, Defensive-Minded Producers

Bank of America mentions one potential idea is to selectively invest in large-cap, defensive-minded North American and European oil producers.

Companies that would fit this description include Exxon Mobil Corporation (NYSE: XOM), Royal Dutch Shell plc (ADR) (NYSE: RDS.A)(NYSE: RDS.B) and BP plc (ADR) (NYSE: BP).

Image credit: L.C. Nøttaasen, Flickr

Posted-In: Bank of America Merrill Lynch Francisco BlanchAnalyst Color Long Ideas Commodities Markets Analyst Ratings Trading Ideas Best of Benzinga


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